Northumbrian seeks bid clarity
Thursday 17 August 1995
Northumbrian Water has complained to the Takeover Panel over the proposed bid for the company by Lyonnaise des Eaux of France, seeking clarification of the predator's plans.
The company alleges that reports in the press suggest Lyonnaise will withdraw if the regulator, Ofwat, holds out for price cuts of up to 20 per cent.
A source in the company said: "If they intend to withdraw if the regulator changes his view then they need to make that clear. That is the impression which has been in the press and we would like some statement. The Panel have heard our side."
Lyonnaise, due to meet the regulator this week, declined to comment. A spokesman for the Takeover Panel also said he could not confirm or deny any approach by the UK water firm.
Lyonnaise, which announced its intention to bid in February, has already angered Northumbrian by refusing to put a price on the bid. Northumbrian's shares rose 5p yesterday to 910p but failed to make up falls earlier in the week on speculation that Lyonnaise might abandon its plans.
Northumbrian has attacked the French group's overtures as "unwelcome and unsolicited", and has criticised Lyonnaise for plunging shareholders and customers into months of uncertainty.
The meetings this week with Ofwat are the first stage in hammering out the conditions under which any takeover would be allowed. The Government has asked Ian Byatt, director general of Ofwat, to set the criteria following an investigation by the Monopolies and Mergers Commission, which concluded that the takeover would be against the public interest.
Mr Byatt is fundamentally opposed to takeovers in the industry on the grounds that they reduce the number of companies and hamper his ability to make comparisons. Lyonnaise already owns North East Water and plans to merge it with neighbouring Northumbrian.
Mr Byatt told the MMC that cuts in water bills of between 15 and 20 per cent would be required over the next four years to outweigh the disadvantages of a takeover. He argues the cuts would force the merged company to the leading edge in efficiency, creating an "exemplary comparator" which would set new industry standards.
Lyonnaise has made it clear it will not bid at any price, warning that customers would be the losers if it decides to walk away. But a spokeswoman for Ofwat said this week that Mr Byatt "usually sticks to his guns".
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