Severn Trent, water supplier to over 4.2 million homes and businesses in the Midlands and mid-Wales has rejected a buyout offer from a group of international funds citing undervaluation of the firm.
The investor-group was led by Borealis Infrastructure, the infrastructure investment arm of a Canadian pension fund and the Kuwait Investment Authority, Kuwait's sovereign wealth fund. The group also included British pension fund, Universities Superannuation Scheme.
Borealis owns stakes in British gas provider Scotia Gas Networks and the Associated British Ports.
"The board of Severn Trent has reviewed the proposal with its advisers and concluded that it completely fails to recognise the existing and potential value of Severn Trent," the company said in a statement.
Severn Trent, one among the three listed British water utilities, did not disclose details of the takeover offer.
Severn Trent has a market capitalisation of about £5bn ($7.6bn/€5.9bn). The company's stock surged 18% after it confirmed the offer, but lost almost all of those gains at the end of the day's trade.
British water utilities have attracted foreign investor-attention in the past. China Investment Corporation (CIC) picked up a stake in Thames Water's parent firm Kemble Water in 2012. Singapore's GIC was part of a consortium that invested in Yorkshire Water in 2007. Both CIC and GIC are sovereign wealth funds and they typically scout for assets that provide stable returns.
The Severn Trent group has two main business divisions, one running operations in the UK and the other world over. The group's turnover for the financial year ended 31 March, 2012 was £1.8bn. The underlying profit before interest tax and exceptional items was £504.2m.