Northern bid outcome hangs in the balance

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The Independent Online
The outcome of the pounds 782m hostile takeover bid for Northern Electric by US power generator CalEnergy was said to be "too close to call" as both sides argued late into the evening about the level of acceptances by shareholders, in what has possibly become the most acrimonious takeover battle since Granada versus Forte earlier this year.

In another surprise announcement the Takeover Panel, which polices bids, gave CalEnergy special dispensation not to release the result until at least midnight yesterday. The offer, which had been brought forward by the US predator from 4 January to 20 December, formally closed at 1pm yesterday afternoon and the result was expected at around 5pm.

Sources suggested that after several recounts CalEnergy, which owns almost 30 per cent of Northern shares, spoke for just over 49 per cent of its target, short of the 50 per cent and one share needed to win. Northern shares rose 3.5p to 641p. As tension mounted last night David Sokol, chairman of CalEnergy, was refusing to say why the Takeover Panel had intervened yet again in the battle. However, further allegations of spoiling tactics by Northern's stockbrokers, BZW, were believed to have been made. Mr Sokol is thought to have been furious that several US funds were unable to lodge their acceptances in favour of CalEnergy by the deadline.

An anxious CalEnergy spokesman said: "It's very, very close and it's just too sensitive to say anything at the moment. We'll be making an announcement as soon as we can." He did not rule out the possibility that the announcement of the final outcome could slip well beyond midnight.

The Nebraska-based group, which is offering Northern investors 650p a share, had previously gained acceptances from 4 per cent of big City shareholders.

However, Standard Life, the insurance group which holds a 3 per cent stake in Northern, was thought to have accepted the offer, giving the US side a big boost.

CalEnergy had always insisted the result would be close, but Northern's fortunes were boosted in the last days of the bid as three of its biggest shareholders backed the existing management, led by battle-hardened David Morris, the chairman.

The Newcastle-based regional power supplier was supported by Prudential, its biggest investor, which traditionally backs the management of utility companies exposed to hostile bids. The Prudential had an 11.35 per cent stake in Northern and argued the 650p-a-share all-cash offer was too cheap. Foreign & Colonial and M&G also backed the company, giving the company just over 15 per cent.

Northern has already stirred up controversy this week when BZW and its advisers, Schroders, bought 2.3 per cent of the company. CalEnergy made furious complaints to the Takeover Panel claiming the two companies were effectively indemnified against any losses on the shares because of the fees they are likely to earn from the bid campaign, but the Panel rejected the argument.

In addition, Northern's vociferous army of some 100,000 small investors, who together own around 17 per cent of the company, are also likely to stay loyal or not to respond to the offer at all. Some other investment funds were also staying on the sidelines last night. One fund manager, who did not want to be named, said: "We have a policy of only accepting an offer if it's agreed." If CalEnergy fails, it will be the second time Mr Morris has fought off a hostile attack. His earlier success was the "scorched earth" defence of the pounds 1.2bn Trafalgar House bid in 1994. By Febuary 1995 Mr Morris had stunned investors with a pounds 560m package of financial incentives worth a total of more than 500p a share, should they reject the offer.