Northern urges bid block
Saturday 06 May 1995
Northern Electric will write to shareholders next week, urging them to reject calls for the board to allow a renewed bid by Trafalgar House.
The company has scheduled an extraordinary general meeting on 2 June to consider a resolution by Wyser Pratte, a US investor, in favour of a renewed bid after an original £1.2bn hostile offer lapsed in March.
Northern is expected to say that Wyser-Pratte's move - backed by shareholders representing 10 per cent of the company - undermines the authority of the board.
It is also likely to promise that a renewed bid will be allowed to proceed after the industry's watchdog, Offer, completes its review of electricity distribution prices, unless the result is a reference to the Monopolies and Mergers Commission. It will be made clear that allowing a bid does not mean that the management will agree to the offer but may fight it as before.
Following the lapse of its offer of £11 a share, Trafalgar House attempted to comeback with a bid at £9.50 a share but needed the consent for any renewed bid from the Northern board. Northern claims it is unable to allow any new bid to proceed while uncertainty over electricity prices persists. New price proposals are expected from Professor Stephen Littlechild, director-general of Offer, at the end of June.
Trafalgar House is thought to be waiting to attack the company again. However, there is concern that Northern's board could prolong the stalemate by refusing to agree Offer's price review, prompting an MMC reference that would take months.
Northern has little support from other regional electricity companies in its fight for independence as it is widely regarded as being responsible for the price review, which covers all 12 regional firms.
Professor Littlechild was moved to look again at prices partly because Northern offered shareholders "sweeteners" worth over £500m to reject the original Trafalgar bid. The package would have left Northern with a gearing of about 225 per cent.
Earlier this week, Offer's Electricity Consumer Committees called for a tough outcome to the review.
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