16th Dec 2016 16:29
(Clarifying details on acceptances required by Severn Trent.)
LONDON (Alliance News) - UK regulator the Competition & Markets Authority on Friday said it will not refer the proposed takeover of water firm Dee Valley Group PLC by larger peer Severn Trent PLC to a phase-two investigation.
Severn Trent is battling to buy Dee Valley against investment firm Ancala Fornia Ltd, which has made a rival bid.
Severn Trent's offer is for 1,825.00p per ordinary Dee Valley share and a comparable cash price of 1,713.00p for each non-voting share. Ancala's offer is for 1,706 pence per share and 1,602.0p for each of the non-voting shares.
The opinion on which company would be best suited to takeover Dee Valley is split. Severn Trent argues it is better suited as it works in the same industry, while Ancala has vowed to keep Dee Valley unchanged.
While the board of Dee Valley has recommended the higher offer from Severn Trent, Dee Valley employees submitted evidence after Severn Trent voluntarily referred the case to the CMA asking for an investigation to be carried out. Dee Valley's Employee Forum, headed by an "employee representative", has said it favours the Ancala offer because it would avoid job losses and an overhaul of the business.
Dee Valley's Employee Forum said "only four employees" supported the offer made Severn Trent. The Forum said Severn Trent poses a threat to the employment of staff at the Wrexham and Chester sites while other concerns relating to the level of customer service and the effect on the local economy "have not been addressed in this opinion".
"The CMA has decided, on the information currently available to it, not to refer the following merger to a phase 2 investigation under the provisions of the Water Industry Act 1991," said the CMA on Friday.
Ancala also has received acceptances from Dee Valley shareholders with a 41.13% stake, and only needs to break the 50% threshold for its deal to go through. Severn Trent's offer needs support from 75% of Dee Valley voting shareholders and a majority by number.
Notably, Ancala gained support from two significant Dee Valley shareholders, AXA Investment Managers UK Ltd and Aviva Investors Global Services PLC - which have locked in their support with a combined 34.15% stake - before Severn Trent launched its higher, rival offer.
Under the terms, AXA can only withdraw support if a rival offer is 10% higher than Ancala's while Aviva can not withdraw support unless a rival offer is made that is 15% higher. Severn Trent's offer is currently only 7.0% higher than that offered by Ancala.
Dee Valley, in its own statement Friday morning, noted the announcement from the CMA, but provided no further comment.
"The Dee Valley board notes today's announcement by the CMA that it has unconditionally cleared the revised Severn Trent acquisition following its phase 1 investigation," Dee Valley said.
Severn Trent said it welcomed the CMA's decision, adding that this is the first merger of water companies to achieve clearance under the new special water merger regime.
"I am obviously delighted that today's unequivocal announcement by the CMA confirms that the Severn Trent offer for Dee Valley can proceed without further regulatory investigation or approval. For all the reasons we have previously set out we absolutely believe Severn Trent will be the best supportive owner of Dee Valley," said Liv Garfield, chief executive of Severn Trent.
In addition, Ancala said Friday, the day after the first closing date for its offer to Dee Valley shareholders, that support stood at 41.13%. However, it has now extended the closing date to December 29, giving it more time to gain the support needed. It also reiterated its willingness to make market purchases of Dee Valley shares at 1,706.0 pence each.
"By extending the revised Ancala bid, we are ensuring that Dee Valley shareholders have a viable option which is deliverable, is free from any regulatory doubt and which, we believe, provides the best outcome for the company," said Spence Clunie, managing partner of Ancala.
Severn Trent also responded to Ancala's statement, stating the investment firm has extended the date "as it has failed to achieve the requisite level of acceptances" needed by the first closing date.
"Whilst Ancala has received acceptances or owns shares representing 41.13% of the issued Dee Valley voting ordinary share capital, the vast majority of the acceptances were obtained from shareholders who had already signed irrevocable undertakings to accept Ancala's offer on October 20, 2016, prior to the announcement of Severn Trent's offer which is 119.0 pence higher," Severn Trent said.
"Neither the terms of the irrevocable undertakings nor the acceptances require the relevant shareholders to vote against Severn Trent's offer, and as a result Severn Trent's offer can still successfully complete for the benefit of all shareholders," Severn Trent stressed.
A court meeting for Dee Valley shareholders to vote on Severn Trent's offer is booked for January 12, while non-voting shareholders have been given a contractual offer.
Severn Trent said any shareholders that want to accept its higher offer should take no action in regards to the rival offer from Ancala and said "they should not sell their shares" to the investment firm.
Severn Trent shares were down 0.1% to 2,182.00 pence per share, giving it a market capitalisation of around GBP5.14 billion, while Dee Valley shares were up 2.1% to 1,795.0 pence, giving it a value of about GBP82.6 million.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Severn Trent