Labour queries Trafalgar bid

Jack Cunningham, the shadow secretary of state for trade and industry, fuelled the row over Trafalgar House's £1.2bn hostile takeover bid for Northern Electric by suggesting that there was improper behaviour.

Northern Electric has already asked the Stock Exchange to look at complex share option contracts entered into by Trafalgar House and its advisers on the bid, Swiss Bank Corporation, which allow Trafalgar to profit from movements in the share prices of Northern and other regional electricity companies.

Speaking in the House of Commons, Dr Cunningham said: "Is there not a case for an inquiry into the Northern Electric share dealings for example? Is there not a question of insider dealing and the exploitation of legal loopholes by Swiss Bank Corporation?"

Dr Cunningham has asked Michael Heseltine, the President of the Board of Trade, to refer the takeover to the Monopolies and Mergers Commission. "Will these matters not set a trend for the future ownership of the RECs? Does the right honourable gentleman not think there are so many aspects to the bid that he should ask the MMC to investigate all parts of it?"

Mr Heseltine said inquiries were being conducted "in the proper manner".

The Department of Trade and Industry later said it was not carrying out an inquiry. The Stock Exchange confirmed, however, that it was looking at all aspects of the circumstances surrounding the bid.

Trafalgar, which has put the cost of the bid at £60m, is expected to make a profit of up to £8m from the "contracts for differences" with Swiss Bank.

Trafalgar yesterday accused Northern of "unsubstantiated allegations and innuendo". It criticised Northern for the delay in calling an extraordinary meeting to change articles of association which prevent any shareholder from holding 15 per cent or more of the shares.