Northern shareholders accept pounds 500m deal

MARY FAGAN

Industrial Correspondent

Five hundred small shareholders flocked to Northern Electric's extraordinary meeting in Newcastle City Hall to approve the first part of a pounds 500m package of sweeteners, offered in defence against the hostile bid earlier this year from Trafalgar House. The initial pounds 2 of the pounds 5-per-share deal will be paid within weeks in the form of special dividends and preference shares.

Northern, whose shares rose by 19p to 914p, also plans a 50p special dividend in 1997, with the balance coming in a special payout related to the planned flotation of the National Grid Company, expected later this year.

The approval comes as City instititutions await a package from Manweb, which is fighting a pounds 1bn hostile attack from Scottish Power and whose first defence is expected by the end of this week. Expectations have been raised by the Northern offer and by South Western Electricity, which is also likely to produce a pounds 5 per share carrot in its attempt to fend off a pounds 1bn bid by Southern Electric International of the US.

On the present timetable Sweb must announce its defence by next Friday but says that the deadline could be extended if the Government has not by then decided whether to refer the US bid to the Monopolies and Mergers Commission. .

Maurice Warren, chairman of Sweb, said yesterday that the defence package would "not just be a Northern lookalike".

"We are looking at a strong package. We are looking at what we can give shareholders now and what we can do in the future," he said. The package would justify a bid price in excess of pounds 10 per share for Sweb, compared with the pounds 9 offered by SEI.

Until last Friday the company was in "white knight" talks with neighbouring Southern Electric of the UK and had agreed a price above pounds 10. But Southern abandoned the discussions, citing regulatory fears.

Mr Warren said that the company continues to talk to other potential suitors but refused to give details. "We are pursuing other leads and contacts. There is other interest," he said. The talks are not thought to include other regional electricity firms.

Takeover activity in the regional electricity sector continues to be clouded by uncertainty over the regulatory position. Professor Stephen Littlechild, the regulator, has just finished consulting on Hanson's pounds 2.5bn agreed bid for Eastern. He is due tomorrow to complete a separate consultation on Scottish Power's bid for Manweb and is expected to deliver his advice to the Office of Fair Trading within days.

There is a view that the entire sector should be referred to set down the ground rules. Henry Casley, chief executive of Southern Electric of the UK, said that the situation needs to be clarified. His company declined to bid for SWEB because of the possibility that its offer would be referred to the MMC while that by SEI was not. Sweb privately expects Southern to come back to the table if the US offer is referred.