Northern Electric sparks pounds 650m US bid

The privatised regional electricity companies were thrown into fresh turmoil yesterday after a little-known US energy group launched a surprise pounds 651m hostile takeover bid for Northern Electric.

The whole sector had been gripped by intense takeover speculation for several days, sending share prices soaring, but Northern Electric had been considered by most City analysts to be the least likely target.

Rejecting the bid last night, Northern's management, led by chairman David Morris, who successfully fended off last year's pounds 1.2bn attack from Trafalgar House, was preparing for another long battle and did not rule out the possibility of further substantial giveaways for shareholders. "We will consider whatever is appropriate by way of giving value to our shareholders," Mr Morris said.

The bid was launched by CE Electric, a British company formed by US power generator CalEnergy of Omaha, Nebraska. CalEnergy has assets worth $3.5bn (pounds 2.2bn) in power projects in the US, the Philippines and Indonesia. The other CE Electric shareholder, with a 30 per cent stake, is Peter Kiewit Sons, a private US construction and mining firm which owns 33 per cent of CalEnergy.

CE Electric is offering 630p a share in cash for Northern shares, valuing the company at pounds 651m. On top of this CE would pay 103p in cash for Northern's preference shares, worth pounds 115m, which were distributed to investors as part of its Trafalgar bid defence.

It also emerged that CE had paid pounds 81m for a 12.72 per cent stake in Northern in a dawn raid. By the close of stock market trading Northern's share price had jumped by 25 per cent, to 648p from 520p on Friday.

Shares in other regional electricity firms also surged ahead, with London adding 18.5p to 608.5p and Southern Electric rising by 17.5p to 647.5p. However shares in East Midlands slipped back from 560.5p to 545.5p, after the much-touted takeover bid by a US utility group failed to materialise.

Explaining the reasons for the offer, David Sokol, CalEnergy's chairman, said bidding for Northern was an attempt to move from power generation into the regulated business of distributing and supplying electricity to customers. The aim would be to expand into other parts of the UK domestic electricity market when it was opened to full competition in 1998.

He claimed this made his bid different from the largely financial rationale of US utility companies which bought other British RECs. "This is a strategic decision because we are a generating company and we want to acquire the skills of distribution and supply," he said.

Mr Sokol said he had spent several weeks looking at the other RECs which are still separately quoted, including East Midlands, which has been frequently tipped as the most likely takeover candidate. Northern was chosen because the Trafalgar bid had thrown up an "enormous amount of data" about its operations.

CalEnergy said it had informed UK regulators of its intentions and did not anticipate a referral to the Monopolies and Mergers Commission. Mr Sokol said he had also priced Labour's windfall tax into the bid.

Last night bitter accusations were being traded between the two sides about whether CE Electric had privately proposed a bid worth around pounds 7 a share. Mr Morris said the 630p formal offer had been lower than any figure previously discussed.

He also accused CE of "unreasonable hustling" in trying to get agreement on the bid before a Northern board meeting could be held yesterday. "I regard all that as rather silly," he said.

CE Electric responded with a statement insisting it had never suggested a price anywhere near pounds 7 a share. It said: "This range was entirely the proposal of Northern Electric, who claimed that financial information would be made available to CE Electric to substantiate such an ambition."

Most City electricity analysts agreed with CE that the bid was reasonably priced, given that Northern had paid out pounds 500m to its shareholders in preference shares and special dividends after the Trafalgar bid. "For the first time ever I think they are paying too much," said one leading analyst.

Another suggested that by adding back the various payouts to investors, the CE Electric bid would be worth pounds 10.25 a share, compared with Trafalgar's highest cash offer of pounds 11. However Trafalgar subsequently lowered its bid to pounds 9.50 following the electricity regulator's shock decision to look again at price controls.

Mr Morris argued the company's shares had been undervalued by the City because of the cash given away to shareholders. The resulting debt burden is likely raise Northern's gearing to around 125 per cent next year after a further special payout of 56p a share in February. Northern also pledged to bring forward the release of its half yearly results, due on 5 December.

Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
The Pipes and Drums of The Scottish Regiments perform during the Opening Ceremony for the Glasgow 2014 Commonwealth Games at Celtic Park on July 23, 2014 in Glasgow, Scotland.
Commonwealth GamesThe actor encouraged the one billion viewers of the event to donate to the children's charity
Sport
Karen Dunbar performs
Entertainers showcase local wit, talent and irrepressible spirit
Sport
Members of the Scotland deleagtion walk past during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
PROMOTED VIDEO
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
books
News
i100
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

PMO Analyst - London - Banking - £350 - £400

£350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

Test Lead - London - Investment Banking

£475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game