Northern calls for support against bid

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The Independent Online
Northern Electric has called on shareholders to reject demands that a renewed £9.50 bid for the company by Trafalgar House should be allowed to proceed, writes Mary Fagan.

Northern has called an extraordinary general meeting on 2 June under pressure from shareholders led by Wyser-Pratte of the US to consider the option, but says it would "seriously undervalue" shares.

David Morris, Northern's chairman, said the proposed resolution is ill- conceived and that no bid should be allowed before a review of electricity distribution prices by Offer, the regulator. This reiterates the line taken by the company after a £11-per-share offer by Trafalgar House lapsed in March.

Mr Morris said: "The resolution seeks to facilitate a low bid by Trafalgar House ... but imposes no obligation on Trafalgar House to make a bid. Your board believes this would benefit Trafalgar House to the disadvantage of Northern Electric's shareholders generally." Northern's shares rose yesterday by 19p to £8.19.

In a letter to shareholders, Mr Morris also said regulatory uncertainty means the board cannot decide the extent to which it can deliver a package of sweeteners worth more £500m, offered in defence of the original attack by Trafalgar House.

Northern's latest missive coincides with a novel twist in the takeover saga - its advisors, S.G. Warburg, are now the subject of a takeover bid by Trafalgar's advisors, Swiss Bank Corporation. There is speculation in the City as to which side will back out of the Northern/Trafalgar debacle should the Warburg takeover proceed.

Trafalgar House is still interested by buying Northern, but is unlikely to attempt a new bid in any case until Offer makes its announcement on prices. This is due at the end of June.

Without Northern's permission to bid, Trafalgar must wait for12 months after the £11 hostile bid lapses. Although Northern has said the predator may come back with another offer once regulatory uncertainty is removed, there is a view that this could be prolonged by many months after the regulator's announcement in June.