Manweb yesterday launched its attempt to fend off the pounds 1.1bn hostile attack by Scottish Power, offering its shareholders a pounds 590m package of sweeteners to reject the bid. The regional company also took the unprec- edented step of issuing a two-year profit forecast to show how it would cope with the recent clampdown on electricity prices by the regulator, Offer.
City analysts were surprised at the package - worth 550p a share, plus an associated 55p tax credit. It would leave Manweb with a debt-to-shareholders' funds ratio of 160 per cent, falling to 130 per cent by the end of the decade, compared with a recent figure of 21 per cent.
Shares in Manweb fell 6p to pounds 10.10 compared with Scottish Power's cash offer of 915p and the cash-plus-shares alternative of about pounds 10.14. Some City analysts said that the Scottish group might still win Manweb by increasing the cash bid to pounds 10. Shares in Scottish Power fell 5p to 371p.
John Roberts, chief executive of Manweb, said: "The Scottish Power bid significantly undervalues this company and that's why we are fighting it. They are trying to solve their problems by buying our solid earnings on the cheap." He attacked Scottish Power's diversification into gas, retailing and telecommunications as "flawed", and said that Manweb would stick to its core operations of electricity distribution and supply.
Manweb forecast profits before tax and exceptional items of pounds 127.2m and pounds 139.6m in the years to 31 March 1996 and 1997 respectively, compared with pounds 139.9m last year. The profit forecasts take into account two successive clampdowns on electricity distribution prices which will reduce income by pounds 52m in the year to March 1997.
One City analyst said that the two-year forecast was "incredibly cheeky" as it did not take into account the effect of the shareholder sweeteners.
Scottish Power said the defence was "weak and inconsistent". The group has until the end of next week to consider whether to increase its offer.
The shareholder package of 550p includes a special dividend of 50p a share and a cash lump sum of 203p. The balance is made up of a preference share worth 125p with full cash alternative and 172p in the form of Manweb's shares in the National Grid Company, which would go to shareholders when the Grid is floated.
Manweb said that after the package was paid out, which assumes the bid will fail, it could deliver a 7 per cent annual nominal increase in dividends.
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