Northern brings out sweeteners
Saturday 22 July 1995
A bid from the conglomerate, which lapsed at pounds 11 per share in March, could come within days following Northern's decision, also announced yesterday, to accept controls on electricity distribution prices set by the regulator, Offer.
The package is almost identical to one proposed in defence of the original Trafalgar bid. At that time, it helped to bring down the wrath of the regulator and helped to prompt the price review that wiped billions from the value of electricity shares.
Trafalgar noted Northern's move and said it was considering its position in the light of the new price controls. The Takeover Panel has set a deadline of 10 August for the announcement of any renewed bid. Northern's shares rose by 41p to 904p in a buoyant day for the sector as a whole.
The package for shareholders will leave Northern with gearing of 175 per cent in March 1997, falling back to 115 per cent by the end of the decade. The initial gearing, unprecedented among UK utilities, is less than the 225 per cent under the original deal, while the figure in the year 2000 compares with 100 per cent under the previous scheme.
The package amounts to pounds 5.01 per share including special dividends of pounds 1.50 and a pounds 1 preference share. The remainder is the value of Northern's shares in the National Grid Company, which it intends to distribute to shareholders, plus a special dividend expected to be paid by the grid in advance of the sale planned for later this year.
The main change is that Northern had projected dividend growth of 13 per cent, which has been scaled back to 7 per cent a year to the end of the decade.
David Morris, chairman, said: "The regulator's latest price proposals secure significant benefits for customers but acknowledge that past profits will not be clawed back and do leave management with a strong incentive to cut costs. Our shareholder package announced today reflects the structure of Offer's proposals and fulfils our promise to shareholders to implement the previous package to the maximum extent possible."
Mr Morris said Professor Littlechild's latest proposals amount to a reduction of pounds 65 per customer over four years at a cost of pounds 95m. Taken with the price controls agreed last August but now revised by Professor Littlechild, the saving for customers is pounds 215 over five years.
Mr Morris denied suggestions that Professor Littlechild had again been too lenient, leaving the package almost unchanged. Offer said it had no intention of revisiting the controls.
Comment, page 19
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