After days of detailed work on the bid by Dominion's board and advisers from SBC Warburg and US buyout specialists Wassterstein Perellas, the Virginia-based power company approached East Midlands yesterday to arrange a meeting.
It is thought the negotiations could take place as early as today. Thomas Capps, Dominion's chairman, was understood to be flying to London to meet for the first time with Sir Nigel Rudd, East Midlands' chairman. Sir Nigel is understood to have made clear that East Midlands will have serious talks about a bid as long as the offer represents a good deal for shareholders.
When the possibility of an approach was revealed last week Dominion said it would not be prepared to pay much more than 608p a share for the Nottingham- based company, valuing it at pounds 1.2bn. However East Midlands is likely to hold out for a price of at least some 650p a share, worth more than pounds 1.3bn.
It was unclear last night whether Dominion was ready to make a formal offer on this scale. A source close to the company said: "There isn't a specific set of parameters at this stage."
There are three possible outcomes from the talks: an agreed takeover bid recommended by East Midlands' board to its shareholders; a hostile bid by Dominion after the failure of the two sides to agree on a price; or the possibility that the US predator would decide not to bid.
Shares in East Midlands surged ahead yesterday, closing up 10p at 603.5p. The share price had been depressed last week by the growing belief among City analysts that a Dominion bid, and the hostile offer already launched by US-controlled CE Electric for Northern Electric, would be blocked by the Government. If both bids succeed, it would leave just three of the 12 privatised regional electricity companies remaining with separate stock market listings.
Professor Stephen Littlechild, the electricity regulator, is thought to be concerned that this would reduce his ability to make efficiency comparisons based on share price performance.
Labour has suggested that if the bids were successful, the Government could insist on keeping a minority of Northern and East Midlands shares trading on the stock market.
John Battle, Labour's energy spokesman, said he was not opposed to electricity takeovers by foreign firms but the regulator had to be certain he could continue to do his job.Reuse content