Severn: We’re worth £1bn more than bid approach


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The Independent Online

Severn Trent, the water giant which this month rejected a Canadian and Kuwaiti takeover approach, today told investors it’s worth almost £8 billion — nearly £1 billion more than the price thought to have been offered by the foreign bidders.

The utility, which keeps the taps running in 7.7 million British homes, was approached earlier this month with a bid said to be worth just under £20 a share, or £4.7 billion, from Canada’s Borealis, the Kuwait Investment Authority and the Universities Superannuation Scheme, a UK pension fund.

Severn Trent rejected that bid, saying it “completely fails to recognise the existing and potential value” of the water firm, and today pointed out its regulated capital value — the figure that the industry regulator Ofwat uses to work out the worth of the utility — was up 4% from £7.1 billion in 2010 to £7.4 billion this year. Trent’s departing chief executive Tony Wray also highlighted that it was set to hit £8 billion by the end of the current regulatory cycle, in 2015.

Ofwat chairman Jonson Cox has said water assets tend to be sold at 1.3 times their regulated capital value, which would mean a bid of £9.6 billion for Severn Trent. Stripping out its £4 billion debts would make the offer worth £5.6 billion.

Severn Trent admitted its underlying pre-tax profit fell slightly to 3.3% to £266.3 million in the 12 months to April. It raised its full-year dividend by 8.2% to 75.85p. Wray, who is to retire next spring, said that was due to last summer’s wet weather meaning lower consumption, plus higher spending on infrastructure. He refused to talk about the bid, saying: “There is no new news. It’s business as usual.”

The consortium has until June 11 to make a firm bid for Severn Trent or walk away. Seven of Britain’s 10 water companies are now in the hands of private — mostly foreign — investors. Severn invested £555 million on pipes and other infrastructure in the year, and reckons it will spend up to £620 million this year.

The shares today slipped back 3.9p to 2031.1p, but the City still expects the consortium to return with a higher bid.