Outlook: Southern goes north of border

NO PREMIUM mergers are rarely quite what they claim. There was little doubt who the City thought had got the better half of the latest example of the genre - yesterday's tie up between Scottish Hydro-Electric and Southern Electric. Since the merger will result in an immediate 22 per cent hike in the Scottish Hydro dividend, it's surely the Scots, isn't it? They get the head office too, which is to be located in Perth.

On the other hand, the two top management jobs are going to the Southern lot. This might seem a reasonable division of spoils to Jim Forbes, the quick-witted Glaswegian who becomes chief executive of the combined group, but his own shareholders might beg to quibble. For Mr Forbes, it's also a bit of a home coming, albeit to the wrong side of Scotland. He gets to take his finance director, too.

None of this will break the deal. Mr Forbes has failed to consummate two mergers so far - with National Power and Southern Water - but the City still loves him for his no-nonsense style and his ability to squeeze costs. More difficult to call is what regulators make of it. Scottish Power management to get away with acquiring ManWeb but that was under the last Government. Peter Mandelson has yet to decide on PowerGen's bid for East Midlands Electricity. But then again, the Scottish card is a powerful one with New Labour, and Mr Forbes has played it perfectly.

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