pounds 4.45bn bid tips see-saw battle for Energy Group to Texas Utiliti es

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The Independent Online
THE extraordinary battle for control of Energy Group, owner of Eastern Electricity, see-sawed back in favour of Texas Utilities yesterday after it raised its offer to pounds 4.45bn and snapped up a 14 per cent stake in the company

The 840p-a-share offer trumped the 820p bid announced on Monday evening by its US rival, PacifiCorp. Last night the Oregon-based PacifiCorp was deciding whether to come back with yet another increased offer.

Texas, which threw its hat into the ring with an opening bid of 810p at the start of the week, said that it had acquired 72.56 million Energy Group shares at the new bid price of 840p representing 13.9 per cent of the company.

PacifiCorp, which began the auction last June for Energy Group with a bid worth 695p, has built up a 10.5 per cent stake. Under Takeover Panel rules, the two groups cannot raise their stakes above 15 per cent.

Although Texas has tabled the highest price, it does not have regulatory clearance for its bid, unlike PacifiCorp which was cleared by the Monopolies and Mergers Commission in December.

An MMC referral of the Texas bid is thought unlikely. But it remains an outside possibility, particularly if the President of the Board of Trade, Margaret Beckett, decides that the funding of the bid could put undue strain on its finances and threaten Eastern's ability to fund its operations.

Eastern is the biggest regional electricity company in Britain with three million customers. It is also the fourth largest electricity generator and one of the biggest independent players in the liberalised gas market.

Erle Nye, the Texas chairman, is due to see the Office of Fair Trading and Department of Trade and Industry officials this week to argue his case for avoiding a referral. Earlier this week Texas said it believed it would get regulatory approvals on both sides of the Atlantic within the two month bid timetable.

Texas has arranged a $10.3bn (pounds 6.24bn) debt facility to fund the bid which, if successful, would initially create a group with debts of $18bn. Disposals and the issue of new equity would reduce this to $14bn, giving it a conventional debt-equity gearing of 155 per cent.

PacifiCorp's initial pounds 3.7bn bid last June was referred to the Monopolies and Mergers Commission in August on the grounds that the regulatory system might not have been sufficient to police the merged company adequately. The Office of Fair Trading and the electricity regulator Professor Stephen Littlechild both came down against a referral.

The bid was subsequently cleared by the MMC in December without any conditions in addition to those already recommended by the OFT to ring-fence Eastern.

One Whitehall source said: "If a case raises the same issues as an earlier one then in general you would be mad to go through the MMC all over again. But no two cases are ever identical."