Dominion Resources to decide today on takeover bid for East Midlands

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The Independent Online
The board of Dominion Resources, the US utility group considering launching a takeover bid for East Midlands Electricity, is expected to decide today whether to press ahead with a formal offer.

Senior Dominion executives were returning to the US last night after evaluating a potential bid with their UK advisers, SBC Warburg. An announcement is likely by Monday.

A bout of profit-taking and mounting fears that the bid would be referred to the Monopolies and Mergers Commission drove East Midland's share price down 15p to 592.5p. The US power supplier revealed on Wednesday it was considering making an offer at not much above 608p.

Sources close to Dominion would say only that the board meeting, to be held at the group's Virginia headquarters, would take place "in the next few working days".

However City analysts said the US company would have to pay around 670p a share for an East Midlands bid to be successful, valuing the Nottingham- based group at pounds 1.3bn.

Electricity analysts at investment bankers Kleinwort Benson advised investors to hang on to their shares and suggested the other three remaining RECs which did not face takeover bids, London, Yorkshire and Southern, could be undervalued by as much as a third.

This assessment was at odds with the increasingly pessimistic views of some fund managers who doubted whether the Government would allow two more RECs to fall into US hands so close to a general election. If Northern Electric was taken over by CE Electric and East Midlands fell to Dominion, it would mean five of the 12 regional power suppliers were under foreign control.

A manager from one leading pension fund commented: "My major concern is on the regulatory front. You just don't know what the DTI is going to do with these bids after it blocked the takeover of South West Water."

However the suggestion that Dominion would pay only 608p for East Midlands gave a massive boost to CE Electric's bid campaign for Northern, helping the US bidders to double their stake in the company.

By last night CE Electric had bought a further 13.5 million Northern shares, raising its stake from 13.4 per cent to 26.76 per cent. Northern shares drifted lower all day, closing 7p down at 623.5p, well below CE Electric's 630p offer price. It brings CE Electric's stake close to the 30 per cent limit under takeover rules pending the bid's approval by the DTI.

David Sokol, the chairman of Nebraska-based CalEnergy, CE Electric's main shareholder, said: "If you look at Dominion's proposed offer it would appear that our bid is too high. People generally regard East Midlands as a better REC than Northern."

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