DealBook: British Water Utility Rejects $7.7 Billion Takeover Offer

Darren Staples/ReutersA Severn Trent service team in Newtown Linford, England.

LONDON – The British water utility Severn Trent has again rejected a takeover offer from a consortium of investment firms that had valued the company at up to $7.7 billion.

It is the second time that Severn Trent, which provides water services to more than four million customers in England and Wales, has spurned the advances of a consortium that includes the sovereign wealth fund Kuwait Investment Authority. The consortium, which also includes the Canadian fund Borealis Infrastructure, made its initial approach for Severn Trent last month.

Under the revised deal announced on Monday, the investment firms had offered shareholders in the British water utility £21.25 for each of their shares in the company, according to statement from Severn Trent.

The takeover price represents a 16 percent premium to the utility’s closing share price on May 13, the day before the initial approach was announced, and values the company at about £5.1 billion ($7.7 billion).

The proposed price, however, would fall to £20.79 a share if Severn Trent paid its investors a 46 pence dividend, which will be voted on next month. Last week, the British utility raised its annual dividend to shareholders to just over 8 percent, as it tried to persuade investors to stick with the company’s current management.

The British utility said the proposed offer did not represent good value for shareholders, adding that the company’s overall value under British regulatory rules was expected to rise to almost £8 billion over the next two years.

The British utility’s share price rose less than one percent, to £20.54, in early afternoon trading in London on Monday.

Rothschild and Citigroup are advising Severn Trent on the proposed deal.

Article source: http://dealbook.nytimes.com/2013/06/03/british-water-utility-rejects-7-7-billion-takeover-offer/?partner=rss&emc=rss