LONDON -- The shares of Severn Trent dropped 50 pence to £20.27 during early London trade this morning after the FTSE 100 member said it had rejected a bid proposal.
Severn Trent, which supplies water to 4.2 million premises in the Midlands and Wales, claimed the takeover approach "completely failed to recognize the existing and potential value" of the group.
The approach, made by a consortium consisting of Borealis Infrastructure Management, the Kuwait Investment Office, and Universities Superannuation Scheme Limited, was revealed yesterday by Severn Trent and caused the water supplier's shares to jump as much as 18%.
Severn Trent today disclosed the approach had valued the shares at "only a modest premium" to the £18.25 price seen before yesterday's announcement.
On Monday, the investment publication Financial News claimed the consortium could be willing to offer up to £23 a share for Severn Trent, which would value the blue chip at close to £5.5 billion.
But even an offer pitched at the current £20.27 price would still equate to a racy 22 times Severn Trent's earnings for the year to September 2012.
Under stock exchange rules, the consortium has until June 11 to table a formal bid or walk away.
Of course, whether the current share-price rating and the possibility the approach will come to nothing now combine to make Severn Trent a sell is something only you can decide.
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The article Severn Trent Rejects Bid Approach originally appeared on Fool.com.
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