LONDON (ShareCast) - Water utility Severn Trent has received details of an improved cash offer from the LongRiver consortium.

The consortium has offered 2,200p per Severn Trent share, including the 45.51p dividend announced in May, which values the group at £5.3bn at a fully diluted basis.

This compares to a revised bid of 2,125p a share, valuing the firm around £5.2bn, that was rejected by Severn Trent on Monday.

Longriver, which is led by Canadian investment group Borealis, said the new offer represented a 34% premium to the Severn Trent’s average closing price in the six months prior to the bid approach on May 13th, and a 21% premium to the closing price on that day.

Furthermore, to take account of the book value Severn Trent’s debt, the consortium noted that the offer represented a premium of 31% to Severn Trent’s regulatory capital value of £7.4bn as at March 31st, or 41% compared to the fair market value of the utility’s debt.

LongRiver, which also includes the Kuwait Investment Office (KIO) and the UK's Universities Superannuation Scheme (USS Limited), said it encouraged the Severn Trent board to “engage with the consortium ahead of the ‘put up or shut up’ deadline” of 17:00 on June 11th.

Borealis President and Chief Executive Officer, Michael Rolland, said the new offer represented “certain and compelling value for Severn Trent shareholders”.

“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.”

Rejecting the previous bid, Severn Trent Chairman, Andrew Duff, had said Monday’s revised offer didn’t value the company’s “increasingly rare combination of yield, inflation-linked business model and potential”.

Last week the company unveiled an 8.2% increase in its full-year dividend despite a 3.3% fall in underlying profit before tax to £266.3m on turnover up 3.4% to £1.83bn.

Shares in Severn Trent rose 4.6% on the news to 2,115p at 14:25 on Friday.

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