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Severn Trent Rejects New LongRiver Consortium Bid

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June 3
10:11 AM 2013

In a surprising move, water utilities firm Severn Trent had declined a higher takeover bid from LongRiver consortium last Monday. The bid had valued the British firm at GBP5 billion or US$7.6 billion. 

The reason for the rejection of the bid, according to Severn Trent, said that the offer failed to recognize its 'long-term value and potential'. The offer provided a value of 2,079.49 pence per share of Severn Trent stock. This offer includes a 16% premium to the company's share value on the day prior to the announcement of the interest from the LongRiver consortium. 

Just last month, Severn Trent had rejected an initial US$7.2 billion bid from the same consortium, pegging the share price at a little under GBP20 per share. At this offer, there was a 10% premium added to the offer from the share price on the bourse at market close the say before the announcement of GBP18.50.

According to Severn Trent, through a statement, "The Board unanimously believes that LongRiver's revised conditional proposal... fails to value the transactions to Severn Trent's shareholders of Severn Trent's increasingly rare combination of yield, inflation linked business model and potential."

Severn Trent is just one of the firms being eyed by yield hungry investors as many British water and sewarage firms offer stable cash flows as well as favorable structure of regulation that insures sure returns.

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