Severn Trent Water
Severn Trent Water, one of the UK’s biggest water suppliers, has rejected a takeover bid from a consortium comprising Canadian investment group Borealis, the Kuwait Investment Office and pension fund the Universities Superannuation Scheme. In a statement, the company said the bid “completely fails to recognise the existing and potential value of Severn Trent”, and while the details of the offer were not revealed, earlier reports indicate it could be worth around £5.3 billion.
Severn Trent Water was formed in 1989 as part of the privatisation of the UK’s water industry. Foreign investors are attracted to British water firms due to their stable returns and effective monopoly on customers, with Thames Water and Yorkshire Water both bought by consortiums in the past few years. News of the takeover bid caused Severn Trent’s share prices to jump by 14 per cent on May 14th.
The consortium that approached Severn Trent now has a deadline of June 11th to make a better offer, although it is not yet known whether or not it plans to. “The timing of the potential deal is somewhat surprising in that it comes just ahead of the UK water sector’s next regulatory price review [in] 2015-20, which is currently underway and due to be finalised next year. This inevitably creates some mid-term risk across the sector,” Tina Cook, analyst at investment management firm Charles Stanley, told the Guardian newspaper.
Last month, Severn Trent Water’s chief executive Tony Wray asked customers to come forward and share their views on how they would like to see their money used during the company’s forthcoming business plan for 2015 to 2020. The company is currently investing £1.3 million a day in water delivery, recovery and treatment. “Of course all of this affects our customers’ water bill, which is why we want to hear from our customers about how they want to see their money being spent,” he said.