Three times the LongRiver consortium came knocking at the door of FTSE100-listed water utility Severn Trent. And, like many a cold-caller, three times it trudged away empty-handed.

"The Severn Trent board has shown no interest in discussing our pre-conditional offer with us," said a seemingly crestfallen Borealis Infrastructure president and chief executive Michael Rolland after the final £5.3bn offer received short shrift in June. Canada’s Borealis was part of a three-way consortium that also included fellow pension manager the Universities Superannuation Scheme of the UK and the Kuwait Investment Office, a sovereign wealth fund.

The intransigence of the Severn Trent board reportedly left some major shareholders puzzled. The Borealis offer was at a 34% premium to Severn Trent’s regulated asset base (RAB) – at the top end of UK utility valuations post-crisis. So, were Severn Trent and its advisers being too bullish in their valuation?

Not necessarily. "There are currently only a finite number of UK-listed water assets remaining, which creates a natural competitive tension given these are sought-after assets and as such continue to demand a high price level, especially as, for a number of investors, the UK is still seen as more attractive than the eurozone," says Deloitte M&A partner Jason Clatworthy. "The board commented that it believed it had a scarcity value and therefore the bidder should be prepared to pay an appropriate premium."

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