North West Water fights Texans for pounds 1.7bn Norweb

Electricity: Customers win Grid payout as agreed bid for Rec is trumped by locals
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The Independent Online

Norweb was at the centre of a fevered bid battle yesterday with North West Water and two American utilities vying for control of the regional electricity company.

Announcement of an agreed pounds 1.7bn offer from Houston Industries and its partner Central and South West Corporation was trumped hours later by a revised hostile bid from NWW worth pounds 1.72bn.

The Americans had hinted that they believed NWW would raise its offer, and Norweb's shares raced ahead in anticipation that the Texas-based electricity companies would go still higher.

Analysts believed the battle was certainly not over. "Norweb is still in play," said Marshall Whiting, of SG Strauss Turnbull. "We were expecting North West Water to come back with a revised offer. And I would think Houston and CSW will now come back. They seem keen to continue the process."

NWW is offering pounds 18.34 cash and two of its own shares for each block of three Norweb shares, equivalent to pounds 11.04 per share. Alternatively, investors can opt to receive pounds 9.75 cash plus a pounds 1 special dividend, valuing each share at pounds 10.75.

Earlier the American companies had made an offer that valued each Norweb share at pounds 10.50, made up of 850p in cash and a special dividend of 200p. Norweb shares closed 117.5p higher at pounds 10.83, with NWW down 21p at 584p.

Brian Staples, the water company's chief executive, said it was well understood that a rival offer was possible and NWW had already planned its revised terms.

He said he did not expect the American companies to raise their bid, but accepted that it was a possibility. "I did not expect them to bid in the first place, and was confounded this morning," Mr Staples said.

"The logic does not make sense. Why get into a bid battle with North West Water when there are other Recs out there that would be cheaper. There are no benefits between the Americans and North West. We are offering savings through rationalisation of the overlaps between the two companies."

The two American utilities, which have formed a joint venture company called Texas Energy Partners to mount the bid, were closeted with their advisers last night and declined to comment.

However, Lee Hogan, president of Houston Industries, had said earlier in the day that their offer may not be the last: "We really feel this bid is full and fair value, but it is not necessarily a final bid." Any revised offer is not expected until next week at the earliest.

Ken Harvey, Norweb's chairman and chief executive, had welcomed the Texas Energy bid, saying that talks started in July and most of the groundwork had been completed before NNW's first offer on 8 September. But yesterday he advised shareholders to sit tight while the bidders battle it out.

He will be a major beneficiary of a takeover as he holds share options worth pounds 1.5 million at the offer price. During the year to the end of March, Mr Harvey earned a salary of pounds 233,589 and has a two-year service contract.

Texas Energy said it wanted to expand into Britain partly because of the country's "very attractive" economic environ- ment.

Mr Hogan described the structure of the bid as like Scottish Power's offer for Manweb, which escaped a monopolies referral. He said Britain also offered a stable political structure and a regulatory regime, curbing consumer charges rather than profits, "which benefits both rate payers and shareholders".

If Texas is successful, Norweb would become the second British electricity company to fall into American ownership, following the pounds 1.07bn takeover of South West Electricity by Southern Electric International. Rumours persist that PacifiCorp, of the US, will counter Scottish Power's Manweb bid.

So far, five of the regional electricity companies privatised in 1990 are the subject of bids, with Manweb the only one still to face a hostile offer.

Yesterday's bid battle ignited other utilities shares with Southern Electric jumping 24p to 836p, and Manweb putting on 12p to pounds 10.14.