One industry source said SBC was grappling with the issue of whether sensitive information could be kept confidential if both advisory teams continued in their roles. He said SBC was "trying to take a view as to whether ring fencing is practical or not".
The issue will come under the spotlight after Northern Electric's extraordinary general meeting in Newcastle today, at which shareholders will vote on whether Trafalgar should be allowed to proceed with a bid. Northern's board blocked a renewed offer at pounds 9.50 per share after an pounds 11 bid lapsed in March.
Some industry observers feel that SBC, as the aggressor, should stand down voluntarily. There is also a view, however, that Northern will be unhappy to retain Warburg under its new ownership but will fight to keep it as adviser for long enough to make life difficult for Trafalgar.
Today's meeting has been forced on Northern by rebel shareholders led by Guy Wyser-Pratte, a US investor who has the support of groups holding 10 per cent of the stock. A spokesman for Northern, which has urged shareholders to reject proposals to allow a bid, said it was confident of victory.
The Prudential, which has about 8 per cent of the shares, is believed to support the board. Mr Wyser-Pratte believes that many UK institutions secretly back his views but will not show their hand. Northern's shares fell by 7p yesterday to close at pounds 7.84.
Northern Electric has already conceded that a bid may proceed once the regulator, Offer, announces plans for new controls on electricity distribution prices. This, however, is now expected to slip beyond the end of June deadline.
Professor Stephen Littlechild, director-general of Offer, is understood to prefer to wait until after the 12 regional electricity companies have announced annual results, which will not be until 30 June. He has also been hampered by the late delivery of a Monopolies and Mergers Commission report on Scottish Hydro-Electric's prices, which is expected to have an important influence on Professor Littlechild's price review in England and Wales.
Trafalgar House is also concerned that, depending on Professor Littlechild's decision, regulatory uncertainty in the industry could remain for months. There is a possibility that some of the regional firms may refuse to accept tough new controls, in which case they also would be referred to the MMC.
Professor Littlechild, who has given little indication as to his thinking, is due to be questioned by the House of Commons Trade and Industry Committee on 21 June. Some analysts believe he may impose a cap limiting electricity distribution prices to inflation less 4 or 5 percentage points. However, there is also pressure from consumer groups for a substantial one-off cut as well as a tight price cap.Reuse content