Energy Group under pressure to name potential bidders
Monday 26 January 1998
PacifiCorp is today expected to ask the Takeover Panel to press for a statement from Energy Group after weekend reports that as many as three other bidders may be eyeing up the business.The potential bidders named include Texas Utilities, the sixth biggest electricity company in the US, Houston Industries, which bid unsuccessfully for Norweb, and Pacific Gas and Electric.
PacifiCorp tabled an agreed pounds 3.6bn offer last July for Energy Group, whose other interests include the US coal producer Peabody. The bid was subsequently referred to the Monopolies and Mergers Commission and then cleared just before Christmas, since when Energy Group has been waiting for a revised offer.
PacifiCorp is set to make a fresh bid once it has received clearance from the US Federal Trade Commission, expected in the next week or so. The FTC has been examining the implications of PacifiCorp acquiring Peabody since the company supplies coal to rival electricity generators on the West Coast.
In a short statement yesterday PacifiCorp said it noted the reports about other parties being interested in Energy Group but could not substantiate whether these were material or not. Apart from Texas Utilities, which is valued at $9bn and has 5.9 million customers, a financial buyer was also rumoured to be interested.
PacifiCorp added that it remained interested in a merger with Energy Group but only on terms that were advantageous to its shareholders.
PacifiCorp's original bid was worth 695p a share. Any revised bid will probably have to be increased to 720p at least, valuing Energy Group at pounds 4bn. The two companies have been playing a cat and mouse game since the MMC gave clearance for a renewed bid, Energy Group arguing that its value has increased since last July and PacifiCorp pointing out that the regulatory outlook for UK electricity companies is tougher than when it first bid.
Seven regional electricity companies are already under US ownership and Energy Group would make it eight. The MMC investigated the financing of PacifiCorp's bid in great detail because of its highly geared nature. The merger would create a group with debts of more than $12bn.
In the end the MMC concluded that existing regulatory controls were sufficient to ring-fence Eastern Electricity.
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