pounds 1.3bn London Electricity bid agreed

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The Independent Online
London Electricity became the latest privatised regional electricity business to go under the hammer yesterday when Entergy, the New Orleans- based utility that has circled the company for several weeks, announced an agreed pounds 1.3bn takeover bid.

The announcement came as Ian Lang, President of the Board of Trade, gave the go-ahead to the pounds 1.3bn agreed bid for East Midlands Electricity by Dominion Resources, the Virginia power group. The Government's decision not to refer the Dominion offer to the Monopolies and Mergers Commission was widely expected, following last Friday's approval of the pounds 782m takeover offer by US generator CalEnergy for Northern Electric.

The bid for London means only two of the 12 privatised regional electricity companies (RECs), Yorkshire Electricity and Southern Electric, are not facing takeover offers. Most analysts expect them to lose their independence before a spring general election.

Last night another US utility, the Texan company Houston Industries, was thought to be considering mounting a bid. Houston has been widely tipped to buy a REC, and last year mounted an unsuccessful joint attack for Norweb, ultimately bought by North West Water.

Entergy is offering to pay 705p in cash for London shares, which it said was 27 per cent higher than London's share price of 566.5p on 23 October, the day before the most recent wave of bid speculation in the industry began. London shares ended the day up 13p at 696.5p.

Shareholders would also receive the interim dividend payout of 14.3p announced with London's half-yearly results last week and due to be paid out on 31 January.

Ed Lupberger, Entergy chairman, reflected the political sensitivity of a US takeover bid for the British capital's power supplier. He pledged to maintain investment and service quality for its 2 million customers:

Entergy provides electricity to 2.4 million customers in Arkansas, Louisiana, Mississippi and Texas. It had sales last year of $6.3bn (pounds 3.7bn) and made profits of $520m. It already owns the company that supplies power to central Melbourne in Australia and has operations in South America and Pakistan.

However, the takeover puts a question mark on London's existing collaboration with Thames Water. Proposals currently under discussion include combining billing systems, procurement and some repair work of the two utilities to cut costs. Entergy said it had not yet spoken to Thames but was expecting to make a "courtesy call".

Terry Ogletree, head of Entergy's power division which will run London, said all of London's non-regulated operations would be under review: "We think those kind of ventures are an appropriate thing for London to pursue, but we just don't know much about them at this stage."

Sir Bob Reid, chairman of London, insisted the deal did not mean a further round of job cuts on top of the 3,000 reduction in London's workforce since privatisation. He said: "This is not going to have any jarring effect on London's employees. They're used to trimming and focusing."

The takeover will also bring a cash bonanza for London directors who stand to make more than pounds 965,350 from share options, on which the dividend will also be paid.

Mike Kersey, who moved to London as chief executive last year, will pocket pounds 95,573, while Alan Towers, finance director, will net pounds 783,755, plus pounds 75,625 from the sale of shares in the company.

The biggest winner is Roger Urwin, former chief executive who left London to manage the National Grid's electricity transmission business last year.

He stands to gain pounds 835,423 from share options, plus a further pounds 665,653 from his shares. Mr Urwin ran into a political storm in 1995 when he made paper profits of pounds 834,000 on previous options.