Norweb battle becomes electric as Texas Energy raises bid
Wednesday 04 October 1995
The battle for Norweb, the regional electricity company, intensified yesterday with an increased offer by Texas Energy Partners valuing Norweb at pounds 1.74bn. Rival bidder North West Water is now widely expected to raise its bid for a second time but Texas also made it clear it was prepared to consider another counter attack.
In the most hotly contested takeover attempt in the sector so far, Texas raised its offer to pounds 10.85 per share compared with North West's increased cash offer last week of pounds 10.75 with an pounds 11.05 in cash and shares.
The US group, a partnership between Houston Industries and Central and South West Corp (CSW), said its increase provides shareholders with a "generous and certain return on their investment".
Tom Shockley, president and chief executive officer of CSW Enterprises, said: "In contrast, North West Water's cash and share offer contains a significant share element that may be adversely affected by a number of factors including a shortfall in the timing, scale and delivery benefits and the financial risk of diversifying into an activity of which North West Water has no direct experience." Mr Shockley said he was "disappointed" at having yet failed to persuade Norweb's board to recommend the new offer but added: "We will convince them."
The renewed offer came as the industry regulator, Professor Stephen Littlechild, issued a consultation document on the Texas bid. Professor Littlechild said the bid raised some of the issues surrounding previous bids for regional electricity companies, including the holding of a public electricity supply licence by a subsidiary rather than a parent company.
He warned this raises concerns about the availability of resources, disposal of assets and the regulator's ability to obtain information. Professor Littlechild would make licence amendments to deal with these concerns, which would involve the ring-fencing of the electricity supply and distribution operations from other parts of the parent group. He also said Texas should not retain Norweb's stake in the National Grid Company, which is due to be floated later this year.
Norweb's board said it would recommend neither offer because of their proximity in value. The company said it would make a recommendation "in due course in the light of North West Water's share price performance and the decisions of the various regulatory authorities". The bid by North West is unusual in that it is being examined by both Offer and the water watchdog, Ofwat.
North West Water declined to comment on the renewed ofensive from Texas Energy and said that it would respond in due course.
The company is expected to consult with its big shareholders before deciding its next move but the consensus among City analysts is that the water group is determined to absorb Norweb in its drive to become a major force in the region.
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