pounds 782m `knockout' offer for Northern

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The Independent Online
CalEnergy, the US power company, yesterday unexpectedly raised its takeover bid for Northern Electric in a further attempt to intensify the pressure on the company, writes Chris Godsmark.

However, David Morris, Northern's chairman, refused to bow to pressure and rejected the higher offer, which has been increased by pounds 16m to a total of pounds 782m.

CE Electric, the bid vehicle controlled by CalEnergy and its partner, the US construction company Peter Kiewit, increased the cash bid from 630p a share to 650p, with a slight rise in the offer for Northern's preference shares from 103p to 105p. CE has also brought forward the final date for shareholders to accept the bid from 4 January to 20 December.

One analyst described the move yesterday as a "knock-out blow" against Northern, which has insisted any bidder should be prepared to pay in the region of 700p. "Psychologically it's just enough to convince Northern's shareholders that it's all over," the analyst said.

David Sokol, CalEnergy chief executive, said: "The debate over the past month has centred on the value of Northern Electric. Prolonging the process will not further deepen the debate and is not in the interests of Northern Electric's employees or customers."

However, Northern shares edged up just 1.5p to 602.5p, with most investors more concerned with the general plunge in share prices. The company's share price has remained below CE Electric's earlier previous 630p-a-share offer price for several weeks.

A CalEnergy source commented: "We hadn't planned to announce this on the day the market fell out of bed. However market adjustments of the this kind of nature don't have much bearing on the fundamentals of the situation."

David Morris, Northern chairman, said the offer was still inadequate. "This fails to recognise the additional financial information we released including our recent forecast of profits for 1997." The company is likely to release another defence document next week.

CalEnergy is believed to have been anxious to bring forward the final closing date for the offer to avoid its campaign losing momentum over the Christmas break.

The outcome of both CalEnergy's bid, and the pounds 1.3bn agreed offer for East Midlands Electricity by Dominion Resources, the US utility, now depends on whether Professor Stephen Littlechild, the industry regulator, has recommended an investigation by the Monopolies and Mergers Commission.

Though previous US takeover bids have been given the go-ahead, one theory by leading City investors is that Professor Littlechild may object to the loss of two more stock market quoted companies to use to make efficiency comparisons.

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