Decision time over REC takeovers

With most ministers returned from holiday, the backlog of reference decisions can finally be cleared. The most pressing and, which ever way they swing, most controversial, involve the three bids for regional electricity companies. Here is what officials will be telling Ian Lang, Secretary of State for Trade and Industry, as he squares up for the decision. "There is no doubt that this is an awkward one, both in terms of established policy and the political fallout. For choice, the regulator, Professor Stephen Littlechild, would refer all three but it is not his decision and in any case, his judgement is occasionally questionable. We believe we've persuaded him to back off on Hanson's bid for Eastern Electric and on Southern's bid for Sweb, but he is sticking to his guns on the Scottish Power bid for Manweb.

"Strictly speaking, there are no competition issues involved in any of these bids. Despite calls from old Labour for Hanson - which still seems to be seen by some as the capitalist devil incarnate - in particular to be referred, it is hard to see how this can be justified, provided adequate regulatory safeguards are put in place.

"The same goes for the Southern bid for Sweb. To refer simply because Southern is foreign would be irrational, not to say quite possibly dangerous, for it might prompt retalitatory action by the Americans.

"The Scottish Power bid is the more tricky one. This is the first takeover bid by one power company for another within Britain. Moreover, this is a generator bidding for a distributor so there are separate issues about the consequences of virtical integration to be considered. However, even accepting there is a better case for referring Scottish than the others, it would cause a stink if Scottish was to be `victimised' and its ambitions stymied in this way while Hanson and the foreigner make hay. The upshot seems to be that you should refer the lot or none of them. To refer the lot is easy but it would be seen by the markets as arbitrary and it would be inconsistent with the mergers policy that recent decision-making has established. It's your shout, Minister."

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