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
Buttoned up: Ryan Reynolds with Helen Mirren in ‘Woman in Gold’
filmFor every box-office smash in his Hollywood career, there's always been a misconceived let-down. Now he says it's time for a reboot
News
people
News
Actress Julianne Moore wins the Best Actress in a Leading Role Award for 'Still Alice' during the 87th Annual Academy Awards in Hollywood, California
people
Sport
Ross Barkley
footballPaul Scholes says it's time for the Everton playmaker to step up and seize the England No 10 shirt
News
'We will fix it': mice in the 1970s children’s programme Bagpuss
science
Life and Style
2 Karl Lagerfeld and Choupette
fashion
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?