LONDON A consortium led by a Kuwaiti sovereign wealth fund and two pension companies raised its proposed offer for Severn Trent (SVT.L) to 5.3 billion pounds ($8.2 billion) on Friday, sending the British water utility's share price up by as much as 9 percent.
LongRiver Partners comprising the Kuwait Investment Office, Britain's Universities Superannuation Scheme and Borealis Infrastructure, which is part of Canadian pension fund OMERS, submitted a conditional cash offer of 2,200 pence for each Severn Trent share to the company's board.
Shares in Severn Trent rose as much as 9 percent to 2,200 pence after the announcement before settling back to trade at 2,105 pence by 10:02 a.m. ET.
The offer is inclusive of the final dividend of 45.51 pence per Severn Trent share proposed by the British group's board on 30 May 2013, and beats an earlier approach of 2,125 pence per share which Severn Trent rejected on June 3 as unreflective of its long-term potential.
A top 20 Severn Trent institutional shareholder said the price was right and expects other big investors to view the offer favorably. "A bid at 22 pounds seems a very fair out-turn," the investor said.
LongRiver said its offer was conditional on satisfactory due diligence checks on the Severn Trent business and the recommendation of the utility's board. It also said it was encouraging the board to engage with the consortium before the 'put up or shut up' deadline for making a formal offer of 1200 ET on June 11.
"LongRiver's proposal of 2,200 pence per share in cash represents certain and compelling value for Severn Trent shareholders," the consortium said in a statement.
"We look forward to engaging with the Severn Trent board to enable us to make our formal offer to Severn Trent shareholders. Without engagement there can be no offer from the consortium."
The pre-conditional offer represents a premium of 34 percent to the average closing price of a Severn Trent share for the six months to May 13, the last day prior to the announcement by Severn Trent that it had received an approach from the consortium, LongRiver said.
Britain's water and sewerage firms have long attracted interest from yield-hungry investors drawn by their stable cash flows and a favorable regulatory structure.
Seven the country's 10 water companies are now in the hands of private investors, with Pennon Group (PNN.L), United Utilities (UU.L) and Severn Trent the remaining listed entities.
(Reporting by Brenda Goh and Chris Ellicott; Editing by Sarah Young and Greg Mahlich)