pounds 1.3bn water war set to erupt as bidders move on Southern

A bidding war looked set to break out last night as Southern Water confirmed it had received approaches from two potential buyers, including ScottishPower, and was considering its options.

A bid, expected to be in the region of pounds 1.3bn, could again ignite the utilities sector, where analysts and investors had been expecting further bid action since the mergers of Swalec and Welsh Water and of NorWeb and North West Water. Shares in Southern Water, which closed Friday at 681p, are expected to soar in trading tomorrow, following the holiday weekend.

ScottishPower, confirming its interest, said a bid would be a step toward creating a multi-utility conglomerate, giving it a water utility to add to its other regulated businesses, which include gas and telecoms.

"We are confirming our interest in Southern and would like to reach agreement with their board," a spokesman for ScottishPower said.

Analysts speculated last night that a US or French utility could also be in the frame. Companies from both countries have been on the acquisition trail in the UK.

An agreed bid was believed to be the most likely outcome, depending on negotiations in coming days. Southern Water is expected to make a formal statement to the Stock Exchange tomorrow.

ScottishPower, which last year paid pounds 1.1bn for Manweb, the regional electricity company, has appointed ING Baring, UBS, James Capel and Scottish firm Noble Grossart. Southern's bankers are Rothschilds and SBC Warburg.

Southern Water, which is capitalised at just over pounds 1bn, last year bought back 10 per cent of its shares, and has one of the industry's strongest balance sheets. According to current fashion in the utility sector, a merger with Scottish would allow the two companies to save millions on centralised costs.

Joint billing systems, metering, information systems, procurement and transport can all generate savings, the company believes. Scottish expects to be able to cut operating costs by as much as pounds 100m by 1998 following its takeover of Manweb.

Similar efficiencies could be achieved through a merger of Scottish and Southern, although insiders caution that the savings would not be as great. Moreover, gearing, now at 52 per cent, would rise further in the event of a successful bid.

The aim is to develop a stronger brand name for Scottish as a utilities provider, irrespective of region. "It's all about price and service," one source said.

ScottishPower owns Caledonian Gas, which supplies 6,000 commercial and industrial customers in the UK. Last year, Scottish spent pounds 18m developing its telecoms subsidiary, Scotti-shTelecom, which is rolling out a fibre- optic network in Central Scotland.

A bid by ScottishPower for Southern is unlikely to be referred to the Monopolies and Mergers Commission, as there are no obvious competitive issues arising from the merger.

News
Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’
news

New UK station Russia Today gives a very bizarre view of Britain

News
people
News
people
Voices
Left: An illustration of the original Jim Crowe, played by TD Rice Right: A Couple dressed as Ray and Janay Rice
voices

By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen

PROMOTED VIDEO
News
i100
Arts and Entertainment
Hand out press photograph/film still from the movie Mad Max Fury Road (Downloaded from the Warner Bro's media site/Jasin Boland/© 2014 Warner Bros. Entertainment Inc.)
films'You have to try everything and it’s all a process of elimination, but ultimately you find your path'
Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films
books

New essay by JK Rowling went live on Pottermore site this morning

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

Arts and Entertainment
Keira Knightley and Benedict Cumberbatch at the premiere of The Imitation Game at the BFI London Film Festival
filmsKeira Knightley tried to miss The Imitation Game premiere to watch Bake Off
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes