Severn Trent PLC (LON:SVT) has sold its North American water business for US$62mln (£48mln) to US investment firms PPC Enterprises LLC and Alston Capital Partners LLC.
The FTSE 100-listed firm said the North American business operates and manages water and wastewater systems, and provides management services to municipalities and local communities in Texas.
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Liv Garfield, Severn Trent’s chief executive, said: "The North American division is a strong business that will be better able to grow and flourish under a new USA-based owner. Its sale enables the Severn Trent Group to focus on its core strategic activities."
The water company said it will restate its prior-year results to take account of the divestment when it issues a first-quarter trading update on July 19, and the business will be reported as a discontinued operation in its half-year results, scheduled to be released on November 23.
The group said the disposal proceeds will be used for general corporate purposes.
In early morning trading, Severn Trent shares were down 1.5%, or 32p at 2,150p, weighed by a downgrade in rating from US broker Bernstein, which downgraded its rating for the water firm's stock to 'underperform' from 'market perform' with a reduced target price of 1,900p from 2,260p.
In a note to clients, Bernstein’s analysts said: "We do not believe the market is adequately pricing in the risk of a material reduction in the weighted average cost of capital and the heightened political risk, which makes M&A unlikely.”
-- Adds share price, broker downgrade --