NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
11 June 2013
Severn Trent Plc ("Severn Trent")
For Immediate Release
Withdrawal of LongRiver's possible offer
The board of Severn Trent (the "Board") notes the announcement by LongRiver Partners, a consortium led by Borealis Infrastructure Management Inc., and including the Kuwait Investment Office and Universities Superannuation Scheme Limited (together, "LongRiver") that it has decided not to make an offer for Severn Trent.
The Board set out clearly in its announcement of 7 June that LongRiver's conditional proposal of 2,154.49p per Severn Trent ordinary share ("Severn Trent share"), plus the already announced final dividend of 45.51p per Severn Trent share, together 2,200p, did not reflect the significant long-term value of Severn Trent or its future potential. This last proposal was a 10p increase on LongRiver's prior private proposal which had been characterised as a "no regrets" price and followed a series of prior public and private proposals. These proposals, including the final dividend of 45.51p per Severn Trent share announced in respect of the year ended 31 March 2013, represented:
· On 14 May, following media speculation, a price of 2,050p per Severn Trent share
· On 31 May, a price of 2,125p per Severn Trent share
· In a series of private conversations over 6 and 7 June, 2,170.51p per Severn Trent share plus "a further modest amount" which turned out to be 4.49p per Severn Trent share and, when invited to submit a "no regrets" price, 2,190p per Severn Trent share.
Throughout this process, Severn Trent has always been open to discussions in the event that LongRiver had put forward a proposal which properly reflected the long-term value and future potential of Severn Trent. Since its announcement of 7 June, Severn Trent has received no further proposals from and has not been contacted by LongRiver.
The Board has carefully evaluated each of the proposals it has received from LongRiver against its understanding of Severn Trent's long-term value and potential. As part of this process it has also carefully listened to the views of its shareholders.
· Severn Trent has a record of delivering value for both shareholders and customers
· Severn Trent has delivered total shareholder return of 72% since 1 April 2010, the start of the current regulatory review period, through to 31 March 2013
· As recently announced, in the year ended 31 March 2013 Severn Trent delivered significant operational improvements and higher levels of customer service
· Severn Trent operates in a well understood and transparent regulatory framework which incentivises companies to invest in water networks and operate them efficiently
· The inflation-linked nature of its business model provides shareholders with an increasingly scarce and highly attractive investment at a time of exceptionally low interest rates
Severn Trent has confidence in its future: its RCV is estimated to grow from £7,364m as at 31 March 2013 to £7,997m by 31 March 2015; its policy is to grow dividends to March 2015 by RPI+3% and it is well prepared for the next price review and for longer-term developments in the future regulatory landscape for the water industry.
Severn Trent has always believed that shareholder interests are best served by strong operational delivery for customers. Severn Trent will continue to drive forward its business with a view to delivering continued shareholder value and improved operational delivery for customers.
Andrew Duff, the Chairman of Severn Trent, said:
"Throughout the course of this process we and our advisers have held talks with, and given careful consideration to every proposal made by the Consortium. 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. 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. We have every confidence in the long-term future and significant value of Severn Trent and look forward to continuing to deliver for all of our shareholders, customers and other stakeholders."
Enquiries:
Severn Trent
John Crosse +44 (0) 24 7771 5000
Tulchan
Andrew Grant +44 (0) 20 7353 4200
Martha Walsh
Bases and Sources
The relevant bases of calculation and sources of information are provided below in the order in which the relevant information first appears in this announcement and by reference to the relevant statement.
1. Reference to total shareholder return is derived from data provided by Thomson Reuters Datastream which assumes reinvestment of dividends.
2. Reference to RCV as at 31 March 2013 is to reported RCV as shown on Ofwat's website. Reference to estimated RCV as at 31 March 2015 is calculated by applying year end RPI forecast from Experian of 3.4% for 13/14 and 3.3% for 14/15. For RCV values see:
www.ofwat.gov.uk/regulating/prs_web_rcvupdates.
