Shares in Severn Trent climbed yesterday after reports that US-based private equity groups were planning a #5 billion takeover.
But Britain's second-biggest listed water company, which provides water and sewerage services to some eight million customers in five million households and businesses, said it had not received any formal or informal offer before declining further comment.
Reports suggest that a consortium of private equity firms, including Kohlberg Kravis Roberts (KKR) and Apollo Management, was considering a bid for the Birmingham-based firm, prompting a 6.3 per cent gain to 1,353 pence. But some analysts were sceptical.
"Sure, Severn Trent is not particularly highly geared I supposed so there might be scope for someone to come in, gear them up, then take out some of the cash," said Charles Stanley analyst Clive Roberts.
"But personally, above and beyond that, I don't really see the attraction.
"They're earning minor returns of around five per cent, they're regulated and they've already sold off most of the non-core, non-regulated businesses."
Gearing is a measure of the degree to which a business is funded by debt rather than shareholders' equity. A highly geared company carries a lot of debt.
The report said bankers believed that if the bid were successful, the private equity firms would retain the Biffa waste business and sell the core water company to one of the many infrastructure players circling the water sector.
Severn Trent has already said it plans a public offering for Biffa.
However, Peter Gavan, director of corporate affairs at Severn Trent, said he had no reason to believe that there was any credence in the reports.