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Northern plans sell-off in bid defence

Northern Electric is planning to sell its electrical retailing business, writes Ian Griffiths. Analysts expect the proposed disposal to be included in a defence document to be published later this month, which will highlight hidden value in the regional electricity company facing a 630p-a-share bid from CalEnergy of the US.

Analysts suggest the sale, probably to a local electrical retail chain, could fetch pounds 60m. They anticipate the document will also focus on the value of Northern's 8 per cent stake in Ionica, the radio waves phone company, which could worth around pounds 60m. Northern is also expected to highlight its supply, generation and oil and gas businesses.

Northern has been revamping its retail business by switching outlets away from the traditional high-street locations to modern out-of-town sites. Half the 24-strong chain is now situated out of town, where profitability is much higher than on the high street. The retail business made pounds 4m, but analysts say this will improve once the transition to out-of-town locations is completed.

Northern Electric's hopes of securing a price for the company in excess of 700p a share have been bolstered by confirmation that it is in talks with a potential white knight.

A number of potential rival suitors to CalEnergy have been contacted, and one has emerged as serious contender. Discussions so far have been limited, however, and more substantive talks are not expected until the Department of Trade and Industry decides on whether a bid for Northern should be referred to the Monopolies and Mergers Commission. That decision is due within the next two weeks.

Northern bolstered its defence last week with better-than-expected interim results.