LONDON The Canadian-led consortium wooing Severn Trent (SVT.L) 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 BINTR.UL, part of Canadian pension fund OMERS, a Kuwaiti sovereign wealth fund and Britain's Universities Superannuation Scheme.
The two parties had until 12 noon ET to start talks, under a timetable imposed by Britain's mergers and acquisitions regulator.
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 cozy, 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 receded.
Analysts at Credit Suisse said on Monday that if the deal did not materialize, another bid was unlikely ahead of the 2014 price review, which they said presented significant uncertainty and downside risk on a one-year view.
(Editing by David Goodman and Elaine Hardcastle)