Gas firm acquires poison pill for pounds 1
Hostile bidder for Centrica could lose rights to British Gas logo
Sunday 12 January 1997
Under the terms of the demerger, Centrica will be allowed to use the British Gas name and logo in Great Britain. BG, as the rest of the old British Gas will be known after the demerger, will be able to use them overseas.
However, if either company is taken over, the right to the name and the logo could be reassigned to the other.
A British Gas spokesman said the provision was not designed as a poison pill but simply to protect the integrity of the brand.
"We have seen in the South-west, where we have faced competition in the domestic market, just how powerful the brand name is. All we are seeking is to ensure that any new owner does not undermine its value," the spokesman said.
The company has not attempted to put any value on the British Gas brand, but it is clearly highly prized. Both BG and Centrica have given undertakings "to observe high standards of quality in the goods and services they supply under the brand, to observe high standards of business ethics in their corporate affairs and, in particular, not to act in a way which is likely to bring the British Gas brand into disrepute".
Centrica states that its primary investment attraction is brand identity. The listing particulars say: "The British Gas brand, which Centrica has the right to use in Great Britain, is well known to residential, commercial and industrial users of gas. The directors believe that the use of the British Gas brand name in Great Britain provides the group with a competitive advantage in its existing businesses and that the brand has the potential to be applied successfully to related products and services."
The company also says that the main risk to the business relates to the brand name. Centrica points out that the quality of customer service has acquired an indifferent reputation in recent months, which it says has had an adverse impact on perception of the British Gas brand.
If Centrica is taken over, the new owner will have just 18 months to create a new brand for a business that currently serves 19 million customers. The new owner would be granted a licence to continue to use the name and logo for 18 months. However, the licence would be non-exclusive. After that period, BG would have the right to regain control of the British Gas brand and the flame logo.
The brand name is particularly important in the domestic market, where competition will be extended next month. The whole domestic market will be opened to competition by the end of next year.
q The Government has spurned the opportunity to release the golden share it will continue to hold in BG after the demerger. The special share in effect prevents any one shareholder from owning more than 15 per cent of the company. British Gas indicated that it thought the special share was no longer appropriate, but the Government has decided to keep it.
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