Midlands counter-bid battle recedes

The prospect of a contested bid battle for Midlands Electricity looked to be receding last night, clearing the way for it to become the third regional power company to fall under the US invasion of the industry.

The pounds 1.7bn agreed bid yesterday from the Ohio-based electricity supplier Cinergy and General Public Utilities of New Jersey was not as high as some analysts had forecast, valuing Midlands at 440p a share.

But industry sources played down the likelihood of Houston Industries, the rumoured counter-bidder, coming in with a rival offer. Meanwhile, Merrill Lynch, brokers to Cinergy and GPU went into the market, buying 28 million shares in Midlands at 432p and lifting their stake to just over 9 per cent.

Bryan Townsend, chairman of Midlands, pledged that the takeover would not result in job losses and forecast that the alliance with the two US groups would produce a "formidable combination" in the world energy market.

Together the two US utilities supply 3.3 million customers in Ohio, Indiana, Kentucky, New Jersey and Pennsylvania and operate 25,000 megawatts of generating plant. They have combined assets of $18bn (pounds 12bn) and a combined market capitalisation of $8bn.

Avon Energy, the joint company formed by Cinergy and GPU to bid for Midlands, will finance the offer with about $1bn of equity while a further pounds 1.5bn of debt is being raised by its bankers, Chase and BZW.

The offer values Midlands at 14.1 times last year's earnings, making it the second most expensive in the sector and represents a premium of 20 per cent over the bid by PowerGen, which was blocked two weeks ago by the President of the Board of Trade, Ian Lang.

Midlands directors will make pounds 876,000 by cashing in their shares in the company but none of the board stand to make bonanza profits from share options.

PowerGen, which holds a crucial 21 per cent stake in Midlands, said last night that it had not been approached by the US bidders and was sitting tight on the holding, which is currently showing a pounds 70m profit. A spokesman said it had not yet decided whether to sell the stake or to apply for a judicial review of the Lang decision.

Since Mr Lang has cleared two takeovers of regional electricity companies by US utilties - Southern Company's bid for SWEB and Central and South West's acquisition of Seeboard - it would seem unlikely that this latest bid will be blocked.

However, in the wake of market confusion caused by the Government's recent rulings on bids in the power sector, nothing is being taken for granted.

Mr Townsend allayed fears that the takeover would mean more job losses on top of the 1,200 in the last two years that have taken the core workforce down to 4,200. But he conceded that jobs would disappear as Midlands continued to improve its efficiency.

Michael Hughes, who will remain as Midlands chief executive, forecast that the takeover would present opportunities in international markets while helping Midlands prepare for the opening up of the domestic electricity and gas markets in 1998. Cinergy is also a significant player in the gas market with 434,000 gas customers in the US.

Midlands owns about 600MW of capacity in the UK through 25 per cent stakes in Teesside Power and Humber Power and is close to signing deals to build gas-fired stations in Turkey and Pakistan.

Comment, page 19

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power