7th Dec 2016 17:25
LONDON (Alliance News) - Severn Trent PLC late Wednesday responded to the confirmation from rival bidder Ancala Fornia Ltd that it will not be increasing its takeover bid for water firm Dee Valley Group PLC, reiterating its own higher offer.
Investment firm Ancala's original takeover attempt of Dee Valley, the last water-only business listed in London, was scuppered when water and wastewater giant Severn Trent emerged with a competing offer, sparking a brief bidding war.
At present, Severn Trent's offer for Dee Valley is 7.0% higher than that tabled by Ancala. Still, Ancala said earlier Wednesday that it will not be increasing its offer again, instead lowering the threshold concerning the amount of Dee Valley shareholders that have to accept its offer to make it unconditional.
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. Severn Trent believes it is better suited to take control of Dee Valley than its rival Ancala.
Ancala's current offer, made before the latest bid by Severn Trent, stands much lower at 1,706.00p, with a comparable cash price of 1,602.00p per non-voting share.
Dee Valley initially recommended the first offer made by Ancala, but withdrew this once Severn Trent entered the frame. Currently, Dee Valley continues to recommend the Severn Trent offer.
Ancala needed acceptances from at least 75% of Dee Valley shareholders for its offer to become unconditional. As of Wednesday, that threshold has been lowered by Ancala to a "simple majority" - implying 50% plus one share.
That is significant as Ancala locked in a considerable amount of irrevocable undertakings from three of Dee Valley's substantial shareholders before Severn Trent placed its first counter offer. Those undertakings can not be revoked unless Severn Trent's offer for Dee Valley is a certain amount higher than that offered by Ancala. Currently, the 7.0% difference between the two offers is not high enough for the commitment made to the Ancala offer to be withdrawn.
AXA Investment Managers UK Ltd, Aviva Investors Global Services Ltd and Dee Valley Chairman John Schofield are the three main shareholders locked in to those undertakings. AXA has a 25.52% stake, Aviva holds a 9.62% stake and Schofield has a 0.02% stake, being the only director to have a shareholding.
As of Wednesday, Ancala has undertakings from Dee Valley shareholders with a total stake of 40.38%, not far from the majority needed for the deal to go through.
AXA and Aviva cannot revoke their commitment to accept the Ancala offer unless a rival bid is placed that is 15% higher than Ancala's offer, and Ancala fails to respond with a higher bid within seven days afterwards.
Severn Trent, on the other hand, needs support from Dee Valley shareholders with a combined 75% stake for its offer to go through - posing a potential problem based on the support for the Ancala offer.
Late Wednesday, Severn Trent said: "In order to benefit from Severn Trent's significantly higher offer, Ordinary Shareholders should continue to take no action in respect of the Ancala Revised Proposal and should not sell their shares to Ancala."
"Dee Valley Voting ordinary shareholders should vote in favour of Severn Trent's Scheme and Dee Valley non-voting ordinary shareholders should accept the Severn Trent contractual offer, as recommended by the Dee Valley board," Severn Trent added.
Severn Trent did note the level of acceptances for the rival offer tabled by Ancala, and noted that a large chunk had been secured before it had made its higher offer.
"Neither the undertakings nor the acceptances prevent Severn Trent's offer from successfully completing for the benefit of all shareholders. The fact the undertakings had been signed by the relevant shareholders, and their acceptances would result, was known to Severn Trent before announcing the scheme, and likewise was known to the Dee Valley board before it decided to recommend and support Severn Trent's scheme," said the company late Wednesday.
"Severn Trent's scheme will be approved if 75% or more (by value of shares held), and a majority in number, of shareholders present and voting at the court meeting vote in favour of the scheme and if the related special resolution is passed at the general meeting," Severn Trent added.
Severn Trent shares closed down 0.6% to 2,060.08p on Wednesday while Dee Valley shares closed flat at 1,810.0p.
By Joshua Warner; [email protected]; @JoshAlliance
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