Severn Trent spent £19m fending off takeover approach

Water company says higher prices across economy and 'quasi taxes' will push up its operating costs

Severn Trent has revealed that it ran up a £19m bill – almost 9% of this year's pre-tax profits – fending off a takeover approach.

The water company rejected a third and final offer in June from LongRiver Partners, a consortium of Canadian, British and Kuwaiti infrastructure investors.

Severn Trent's board decided that the proposed £5.3bn offer, at £22 a share, undervalued the future potential of the business, although LongRiver argued it was "a full and fair price" for the company, which supplies water and sewerage services to 4.2 million households in the Midlands and Wales.

In a trading statement, Severn Trent said the saga cost it £19m in "advisory, legal and other services". This is almost 9% of the pre-tax profits of £215m the company earned in the year ending 31 March.

Severn Trent's advisers included Rothschild, Citi, Barclays, Morgan Stanley and the financial PR firm Tulchan.

Severn Trent customers' bills rose by 2% on 1 April, which the company attributed to rising inflation. The statement said higher prices across the economy and "quasi taxes" would push up its operating costs.

Water companies are seen as an attractive investment because they are regulated industries with a constant demand for their services.

The failed LongRiver consortium was led by Borealis Infrastructure Management, the infrastructure investment arm of a Canadian local authority pension fund. The other members were the UK's University Superannuation Scheme and the Kuwait Investment Authority, a sovereign wealth fund.

Takeover rules bar the consortium from making a fresh bid for at least six months.

Article Source : http://www.guardian.co.uk

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