Manweb woos white knight

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The Independent Online
Manweb yesterday announced that it was talking to a white knight who may make a counter bid against against Scottish Power's pounds 1.13bn hostile offer.

At the same time Swalec, the South Wales power distributor, announced a giveaway to shareholders worth up to pounds 315m, but denied that this was a pre-emptive move against a possible bid.

The Manweb white knight, the latest development in the turmoil that is radically changing the structure of the electricity industry, follows the company's scorched-earth defence against Scottish Power last week, which included a special dividend and other sweeteners worth more than pounds 600m.

Manweb refused to give any details of the possible counterbidder beyond saying it was in "substantive discussions with an overseas third party which may or may not lead to a recommended cash offer".

The City was sceptical about the likelihood of a contested bid when other untouched bid targets are still available and when the price would probably have to exceed Scottish Power's final offer of 1,025p a share by a substantial margin.

Names mentioned included Veba and RWE of Germany and, from among the US utilities, Houston Oil & Gas and Central & South West. Manweb shares rose 17p to 1,012p.

Swalec, which rebuffed approaches several years ago from Welsh Water, said the move was not a defence against possible bidders, though it admitted to having "very carefully prepared defence plans" against any bidder that may emerge. Andrew Walker, group chief executive, said: "This is part of a considered approach to returning value to shareholders."

The only direct cash benefit for customers is that Swalec supports the idea of a cash rebate - likely to be about pounds 35 - out of the Grid flotation proceeds.

Swalec said it would raise the base level of its annual dividend by at least 8p a share to 38.6 p. This represented a new starting point for future dividend increases which would average at least 4 per cent a year in real terms - starting in the current financial year. The new dividend policy was worth pounds 50m in present value.

Swalec also promised a buyback of up to 10 per cent of its shares, worth pounds 65m to shareholders, and said that it would pass on to shareholders the pounds 200m benefits of the sale of its stake in National Grid.

The pounds 315m giveaway would raise the company's gearing from 11 per cent to 50 per cent, which compares with 160 per cent for the Manweb package. Swalec is also planning to cut costs by pounds 45m but Mr Walker would not say how many jobs would go. Swalec shares rose 11p to 926p.

Meanwhile, North West Water promised regulators that it would not abuse its position after a takeover of Norweb by disconnecting water from de- faulting electricity consumers and vice versa.

North West also said the cost of its bid would be pounds 38m.

Also yesterday, Tony Blair, the Labour leader, wrote to John Major urging him to refer PowerGen's bid for Midlands Electricity to the Monopolies and Mergers Commission.