By Anjuli Davies and Paul Sandle
LONDON, June 11 The Canadian-led consortium
wooing Severn Trent walked away empty handed on Tuesday
after the British water company refused to engage in talks
before a bid deadline expired.
The LongRiver consortium, which had three approaches spurned
by Severn Trent, said it would not table a new offer unless
talks with the utility's board were forthcoming.
"We told them what we needed, they didn't do anything,
that's their prerogative," a source familiar with the
consortium's thinking told Reuters. "Never at any stage did they
say 'If you bid X or Y that would be acceptable'."
The source said there had been no meetings since the first
approach on May 14.
The consortium's last approach, pitched at 2,200 pence a
share and valuing the water company at $8.2 billion, was given
short shrift by Severn Trent on Friday, saying that it did not
reflect the long-term value or potential of the company.
Its stance tested the patience of the bidder, comprising
Borealis Infrastructure, part of Canadian pension
fund OMERS, a Kuwaiti sovereign wealth fund and Britain's
Universities Superannuation Scheme.
The two parties had until 1600 GMT to start talks, under a
timetable imposed by Britain's mergers and acquisitions
Severn Trent said it had always been open to negotiations
provided that LongRiver put forward a proposal which properly
reflected the long-term value and potential of the company.
"We have consistently made clear to the Consortium our
belief that Severn Trent has a value to our shareholders above
the level it indicated it was willing to pay," Severn Trent
chairman Andrew Duff said.
"This difference in value has been at the heart of this
process and the Consortium has either not been able, or willing,
to bridge that value gap."
British utilities have been an attractive target for bidders
looking for the secure and consistent cash flows that the
regulated water and energy supply industries can deliver.
Severn Trent had been encouraged to start negotiations by
some major shareholders in an attempt to elicit a higher offer,
but to no avail.
"It's pretty disappointing. It looks like the bid/ask spread
wasn't that wide so it's perplexing," one hedge fund investor
told Reuters, speaking on condition of anonymity.
"The target itself though acted in a way that makes you
wonder if they value independence more than shareholders'
interest. There are a lot of index holders on the register, they
are very passive, so the board can hide behind cosy, passive
shareholders," he added.
Shares in the group closed down 0.5 percent at 1,946 pence,
after falling 6 percent on Monday as hopes of a firm offer
Analysts at Credit Suisse said on Monday that if the deal
did not materialise, another bid was unlikely ahead of the 2014
price review, which they said presented significant uncertainty
and downside risk on a one-year view.