Last night Dominion's UK advisers, investment bankers SBC Warburg, were believed to be putting together the finishing touches to the offer with their US counterparts, buyout specialists Wasserstein Perella.
The bid will probably value East Midlands shares at between 630p and 650p, giving a price range of pounds 1.25bn to pounds 1.3bn. The shares closed on Friday at 593.5p.
The takeover bid will be the second by a US company for a privatised regional electricity company in the space of two weeks. Northern Electric isfighting a pounds 766m all cash offer from CE Electric, which is majority owned by the American power generator CalEnergy. If both bids are successful, it would leave just three RECs still independent: London, Yorkshire and Southern.
Last week Dominion confirmed it was considering making a bid for East Midlands but would not be prepared to pay much more than 608p a share, valuing the Nottingham-based business at pounds 1.2bn. The final decision on the price will rest with Dominion's board.
East Midlands executives were yesterday evening preparing their response to a bid with advisers from the merchant banking group Schroders.
Despite the fact that Dominion has been eyeing the company since the summer there has been no formal request for a meeting with East Midland's directors, including the chairman, Nigel Rudd.
An informal approach was made by Dominion last week but until now contacts have been between City advisers. "We will make contact when there's a bid," said a Dominion source. Analysts have suggested a potential bidder would have to pay around 670p a share, though Mr Rudd is unlikely to recommend any bid at the outset unless it is closer to 700p, representing a price of around pounds 1.4bn. Dominion, with 1.9 million customers and sales last year of $4.65bn (pounds 2.8bn), is similar in size to East Midlands. The UK company is widely thought to have been one of the best managed RECs in recent years, having slashed its workforce by almost 40 per cent since privatisation six years ago.
The biggest question mark hangs over the attitude of the regulatory authorities. Fund managers who control most of the shares believe the Government will block both bids on the grounds that they would leave too few stock market-quoted RECs to use for efficiency comparisons. The growing uncertainty has hit the share prices of East Midlands and Northern.Reuse content