Northern takeover war hits new low

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The Independent Online
CHARGES of mismanagement and dirty tricks brought the rancorous £1.2bn takeover battle for Northern Electric to a new low yesterday.

David Morris, Northern's chairman, blasted claims by bidder Trafalgar House that his company was poorly managed as "totally without foundation. We actually run this business on a day-to-day basis very well."

Trafalgar, which issued a profits warning when it raised its bid by 52p to £11 a share on Thursday, cannot say the same, Mr Morris argued. He claimed: "Clearly they're financially stretched and also stretched in management terms."

Northern noted that Trafalgar's executive managers have taken a back seat during the bid battle to non-executives who have links with Jardine Matheson Holdings - which owns 26 per cent of the engineering, hotels and luxury liner company through Hong Kong Land. "They don't understand this business very well," said Mr Morris. "They don't understand regulation."

Officials at Trafalgar House were equally angry about a leaked analysis implying its chairman, Simon Keswick, earned up to £1.3m in remuneration and £3.5m in dividends from Jardine and seven of its subsidiaries.

A spokesman for the Hong Kong-based conglomerate, registered in Bermuda, said Mr Keswick is paid only once as its operating director and sits on the subsidiaries' boards for free. Much of the dividend income attributed to him goes into family trusts.

Jardine would not reveal how much it pays individual directors, but the group's financial reports showed the average remuneration to be £720,000. Mr Keswick's £96,000 package from Trafalgar is not included in the total. "These pay figures going around are not accurate," said a spokesman for Trafalgar. "It's a dirty trick."

The slanging match comes as Northern's stockholders decide whether to accept Trafalgar's £11 a share offer - a figure that Mr Morris described as "parsimonious". Analysts had expected Trafalgar to bid up to £12. "It wasn't a knock-out bid," said one. "Northern's still in play."

On Friday institutional investors were torn about whether to accept. Some felt that unless another bidder comes along in the next two weeks they would take Trafalgar's cash. Enthusiasm for the alternate offer of cash and shares was more muted. Some argued that turning both down would send a signal to potential predators that they expect to get more for other electricity stocks.

Questions were also raised in the City about the decision by banks underwriting Trafalgar's convertible preference share issue to reduce their backing to 88p from 93p in the first offer. "It seems they don't have much confidence in them and I can understand why,'' said one fund manager, referring to the profits warning.

Trafalgar said when it announced the increased offer on Thursday that it was likely to produce a loss in the first half due to compensation claims by passengers on the QE2's disastrous Christmas cruise. City analysts downgraded forecasts for the company's year-end pre-tax profits from £90m to £50m.

Northern Electric's executives are lobbying hard to have the offer rejected. A week ago the company revealed a defence plan that would return £5.07 a share to its owners while boosting the company's gearing to 225 per cent.

Trafalgar's shares slipped 1/2p to 64p on Friday. Northern's closed at £10.58, up 5p but still well below the bid price.

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