Water Company Severn Trent Climbs on Borealis Bid Report

(Bloomberg) — Severn Trent Plc, Britain’s second-largest
publicly traded water company, surged the most since May 2013
following a report of a 5 billion-pound ($7.9 billion) takeover
bid by Canada’s Borealis Infrastructure Management Inc.

The shares swelled 5.9 percent to 2,176 pence by the close
in London after The Sunday Times reported without citing anybody
that Borealis was considering a bid. Severn Trent declined to
comment Monday and Borealis spokeswoman Lori McLeod didn’t
return calls and e-mails for comment.

Borealis and its investment partners made two offers to buy
Severn Trent in 2013 that the Coventry-based utility rejected as
too low. The second bid for Severn Trent, which supplies
drinking water and wastewater services to about 7.7 million
people across the Midlands and mid-Wales, was priced at 2,125
pence a share with a dividend.

Any current bid would have to surpass a 35 percent premium
to the utility’s regulatory asset value, meaning it would have
to be higher than Borealis’s 2013 offer, according to a note
from Sanford C. Bernstein. With Severn Trent’s current market
value including Monday’s gain at 5.16 billion pounds, the report
of a 5 billion-pound bid represents no premium.

Ofwat, Britain’s water regulator, in December set the
prices that utilities can charge for the five years through
2020. As that ended regulatory uncertainty, takeovers in the
industry would likely be spurred, Michael McVeigh, director of
corporate finance at Ernst & Young Global Ltd., said then.

United Utilities Group Plc, the country’s biggest water
company by market value, gained 3.7 percent on Monday to 987
pence. Shares of Pennon Group Plc, the third-largest of the
U.K.’s publicly traded water utilities, added 4 percent to 853.5
pence as markets closed higher across the U.K. and Europe.

In March, Toronto-based Borealis led a group of investors
in the $7 billion takeover of Fortum Oyj’s Swedish electrical
distribution network.

To contact the reporter on this story:
Louise Downing in London at
ldowning4@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Randall Hackley, Ana Monteiro

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