Northern Electric bolsters defence

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Northern Electric was last night seeking to bolster its defence against the pounds 766m hostile takeover bid by US power generator CalEnergy by identifying what it believes are unrealised assets in its portfolio to convince shareholders to reject the 630p-a-share all-cash offer.

The company claimed its 8 per cent stake in the recently established wireless telephone operator, Ionica, could be a strong source of future income. The shareholding in the Cambridge-based venture is currently valued at just pounds 10m in Northern's balance sheet.

However Northern's explanation of the likely flotation prospects for Ionica conflicted with those of the business itself. Other shareholders in the company include Yorkshire Electricity, with a stake of some 20 per cent, and the US investment bank Morgan Stanley.

Ionica won the first government licence to provide a telephone service using a wireless aerial from the side of the house to local base stations. Supporters of fixed wireless technology argue the initial investment costs are much lower than those of cable operators who need to lay cables underground before customers are signed up.

David Morris, Northern's chairman, admitted his initial investment in Ionica had been modest, but said: "I think it's fair to say the intention is to float the company at some stage. It could be quite an exciting flotation. We seem to have made a very exciting investment."

Sources close to Northern suggested the likely date for a flotation would be next year. Mr Morris said SBC Warburg and James Capel had been appointed as advisers to a float.

The comments were at odds with the assessment of Ionica's chief executive, Nigel Playford, who insisted no decisions had yet been taken about whether to float the company.

"It's pure speculation," he said yesterday. "No decisions have been taken on how to proceed. We have a number of funding options at the moment of which flotation is only one." Ionica has so far raised pounds 200m in private capital.

However, advisers to CalEnergy insisted an undisclosed value for Ionica had been factored into the bid.

Another unrealised asset could be Sovereign Exploration, Northern's gas exploration company bought last year from a Finnish oil and gas group, Neste, for pounds 11.2m.

A further bonus could be a contract just announced to supply all 730 Sainsbury supermarket stores with electricity from this week for a year. Northern shares rose 4p to 635p yesterday.

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