Lyonnaise des Eaux of France hopes to hammer out proposals for an agreed takeover of Northumbrian Water at a meeting scheduled for next Tuesday. The discussion between the two companies follows months of uncertainty over Lyonnaise's intentions, culminating earlier this week in the Government clearing a potential bid for the UK water group.
David Cranston, Northumbrian Water's chief executive, said: "From our point of view we are not for sale. We believe that any benefits of a takeover could be done through co-operation locally and at the international level. All we want to see is some clarity as to their purpose and that is why we have agreed to meet."
Sir Frederick Holliday, chairman, added: "The board remains confident of Northumbrian's strong pros-pects as an independent company."
Northumbrian made clear that a package of shareholder and customer handouts is on the way, whether or not Lyonnaise mounts a bid. Mr Cranston said the company was in discussions with the industry regulator, Ian Byatt, over the detail. But the likely outcome could include a customer rebate next year and a package for shareholders, possibly including preference shares.
Speaking as Northumbrian announced a 33 per cent increase in interim pre-tax profits to pounds 61.4m, Mr Cranston said the board was seeking to share out the benefits of efficiency gains over and above those required by the regulatory regime. He said these arrangements, which would be "of considerable benefit" to both shareholders and customers, would not be announced until after clarification of the "unwelcome and uncertain situation created by Lyonnaise des Eaux".
Northumbrian's earnings per share in the six months to 30 September increased to 70.3p from 59.1p a year ago. The interim dividend increased by 17 per cent to 11p. The company said any future benefit-sharing plans could result in a "step reduction" in the dividend cover to not less than 2.5 times from around four times at present.
Northumbrian would be the first of the 10 big water and sewage companies to fall prey to a takeover bid. Ian Lang, President of the Board of Trade, has imposed reductions in water bills of 15 per cent over six years as a condition of a bid by Lyonnaise, which already owns neighbouring North East Water and would merge the two companies. City analysts believe Lyonnaise could win Northumbrian at between pounds 11 and pounds 12. Shares in the water company yesterday fell by 2p to pounds 10.91.
Speculation also continued over the future of South Wales Electricity following the announcement on Wednesday by Welsh Water that it was considering a bid for the electricity firm. Welsh Water first swooped on Swalec five years ago, at one point holding a 15 per cent stake, but was consistently rebuffed in its advances.Reuse content