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UK utility Severn rejects offer from USS-backed consortium

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  • UK utility Severn rejects offer from USS-backed consortium

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GLOBAL – A consortium including the Universities Superannuation Scheme (USS) has seen a revised, £5.8bn (€6.8bn) offer UK utility Severn Trent rejected by the company's board less than a month after its approach was made public.

In a statement, the company said it had received a revised offer following the initial £5bn approach by LongRiver – comprising Ontario Municipal Employees Retirement System-owned Borealis Infrastructure Management, the Kuwait Investment Office and USS.

But it said the 16% increase over the initial bid failed to reflect Severn Trent's "significant long-term value".

It pointed to share price growth of 617p in the three years prior to the bid's announcement, and said it had "confidence" in its plans to grow dividends by 3 percentage points above the retail prices index (RPI).

"Accordingly, Severn Trent has informed LongRiver it has rejected the revised proposal," the company said.

Company chairman Andrew Duff further highlighted Severn Trent's inflation-linked revenue base.

"The board unanimously believes LongRiver's revised conditional proposal at 2,079.49 pence per share, excluding the final dividend we have already announced, fails to value the attractions to Severn Trent's shareholders of Severn Trent's increasingly rare combination of yield, inflation-linked business model and potential," he said.

The company's share price rose sharply after the bid was made public, closing at £20.59 last week before the board's decision to reject the deal was announced.  

At time of writing, the price had fallen a further 20p, well above the £18.25 closing price prior to LongRiver's interest being confirmed.

USS, the UK's second-largest pension fund, has recently been active in the utilities sector, agreeing several inflation-linked, £100m long-term financing deals with Affinity Water and South East Water.

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