Water companies attract suitors

Foreign and British bidders are poised to return with a higher bid for water group Severn Trent, while overseas investors are also jostling to buy a stake in Yorkshire Water owner Kelda, according to reports.

A consortium of bidders led by Canadian infrastructure investment group Borealis is likely to make a bid of around £5 billion for Severn before a June 11 deadline, the Sunday Telegraph reported. Severn supplies 4.2 million households and businesses across the Midlands and parts of Wales.

In a separate development, the Sunday Times said international suitors including Abu Dhabi's sovereign wealth arm are considering buying a 30% stake in Yorkshire Water for between £1 billion and £1.5 billion, put up for sale by its private equity and fund owners.

Severn rejected an undisclosed offer from Borealis, the Kuwait Investment Office and Universities Superannuation Scheme earlier this month as significantly undervaluing the group. But the consortium is reportedly poised to return with a bid of around 2000p to 2100p, valuing it at just under £5 billion - ahead of a Takeover Panel deadline of June 11.

The report added the consortium will not go hostile with its bid if Severn's board again rejects the offer.

Severn said earlier this month: "The board of Severn Trent has reviewed the proposal with its advisers and concluded that it completely fails to recognise the existing and potential value of Severn Trent." It added the bid offered ''only a modest premium'' to its share price prior to takeover interest becoming known.

Borealis already co-owns the UK's biggest ports operator Associated British Ports and the London-to-Paris High Speed 1 rail line. It invests on behalf of thousands of Canadian workers and pensioners in the Ontario Municipal Employees Retirement System.

The Kuwait Investment Authority invests the emirate's vast oil wealth while the Universities Superannuation Scheme invests the pensions of UK higher education workers.

A spokesman for Borealis declined to comment.

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British water firms are prized by foreign investors and pension funds for their monopoly on customers and relatively stable returns.