New Northern bid deadline disputed
Monday 23 December 1996
The unexpected extension came after details emerged of a pounds 250,000 "performance" fee to be paid to BZW by Northern. The payment followed Wednesday's controversial purchase by BZW, Northern's brokers, of a 2.3 per cent stake.
Northern yesterday vehemently denied that the purchase of the stake and the performance payment were in any way connected. However, the furious row over tactics which has engulfed the bid was threatening to seriously dent BZW's reputation and to cost Northern Electric its independence.
It also raises the possibility that the Securities and Futures Authority may mount an investigation into the affair.
The appeal promises to be one of the toughest and most controversial decisions the panel, which lays down the rules for takeover bids, has had to take.
Last night CalEnergy, the US power generator which controls CE Electric, was claiming victory over Northern, with 50.33 per cent of shares under its control. However, this included acceptances from shareholders received after the original final deadline of 1pm on Friday, at which stage CalEnergy spoke for 49.77 per cent, just short of the 50 per cent and one share necessary to win.
Though the deadline has now been extended until 1pm on Christmas Eve, the panel has yet to decide whether additional acceptances received after Friday will be taken into account.
The arguments first erupted last Wednesday when BZW disclosed to the Stock Exchange that it had bought 2.3 per cent of Northern shares at 645p a share for pounds 15.2m. BZW pledged to back the management, though the company maintained it had no prior knowledge of the purchase.
CalEnergy appealed to the Takeover Panel, accusing BZW of attempting to manipulate the bid outcome, but the panel upheld its original decision to approve the share-buying on the grounds that "such purchases were conducted on an arm's length basis with no financial support, arrangement or understanding with Northern".
The panel also said BZW had made it clear it was being paid by Northern on a flat-fee basis and would receive no special payments for buying the stakes.
If Northern defeats the CalEnergy bid at 650p a share, its share price would almost certainly fall substantially, effectively leaving loyal shareholders, including BZW, out of pocket.
Last Thursday, Northern was believed to have agreed to pay BZW a pounds 250,000 "performance" fee, on top of a flat-rate sum for its work, believed to be about pounds 1.5m. It was not until Friday that the BZW team, led by senior director Simon de Zoete, disclosed the performance payment to the panel.
Yesterday Northern claimed the fee related to a similar sum which had been left unpaid after work done by BZW during the defence of an earlier hostile bid for the company by Trafalgar House, which lapsed in spring 1995.
BZW also said the performance fee, which had been agreed but had not yet been received, was not success-related. A spokesman said: "A very small element of our fee was payable at the discretion of the company if it considered we had carried out our broking advisory services well. Clearly that fee was in no way connected to the purchase of shares and we reached our decision to purchase the shares without consideration of that element of the fee. Our fee, including the discretionary element, did not alter as a result of our purchase of shares and remains the same irrespective of the outcome of the bid."
The countdown to chaos
Wednesday 18 December
BZW and Schroders, Northern's advisers, buy 2.4 million Northern Electric shares, or 2.3 per cent of the company, with approval of the Takeover Panel.
CE Electric's appeal to the panel is dismissed on grounds there was no breach of its code.
The ruling says the stake was approved on the basis that the purchases were on an "arm's length basis" with Northern.
Friday 20 December
BZW tells the panel about the pounds 250,000 "performance" fee.
The panel asks CE Electric not to reveal the result of the bid, which closed at 1pm, until midnight. At this stage CE Electric held 49.77 per cent of Northern.
A full panel hearing decides to extend the offer deadline to 1pm Christmas Eve.
Saturday 21 December
CE Electric says acceptances received after the 1pm deadline give it control of Northern, with a 50.33 per cent stake.
Sunday 22 December
BZW and Northern considers appealing against the extension of the bid deadline.
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