Scottish Power takes 7.3% in hostile bid for Manweb
Tuesday 25 July 1995
The attack - and the acquisition by Scottish Power of 7.3 per cent of Manweb's shares - threw the sector into further turmoil. Earlier this month Southern Electric International of the US launched a pounds 1bn attack on South Western Electricity. And Northern Electric is braced for a new bid by Trafalgar House following the lapse of its pounds 11-per-share offer in March.
The Scottish offer triggered an immediate call by Labour for the bid for Manweb to be referred to the Monopolies and Mergers Commisson. Brian Wilson, shadow trade and industry minister, said that Manweb had an unusually good record on consumer protection and energy conservation. "It is essential that there is a referral to the MMC to ensure that the consumer ends up with no worse a deal. The combination of privatisation and weak regulation has created a war-chest mentality among the electricity companies, who are now forced to think in terms of fighting off takeover bids rather than serving consumers," he said.
Scottish Power, the larger of the two electricity companies north of the border, said its 948p per share offer - with a 915p full cash alternative - represented "full value". The company is advised in the bid by Barings.
Murray Stuart, chairman, said: "Manweb is a small regional electricity company with high distribution costs and limited potential. We believe we are realistically offering full value for the company's shareholders."
Mr Stuart said that Scottish Power would use its experience in developing an efficient electricity distribution operation in Scotland to drive down Manweb's costs. He added that there would "clearly" be job losses over and above the 500 already planned by Manweb over the next few years.
John Roberts, chief executive of Manweb, said: "The offer fundamentally undervalues Manweb's prospects under its existing management team. We intend to contest it vigorously."
Mr Roberts said he did not see any benefit in holding discussions with the aggressor at the level of the current offer. "Scottish Power's offer represents nothing but an opening gambit," he said. Some City analysts said the offer price seemed fair and that it was difficult to see how Manweb will counter it given the harshness of the price review by the watchdog, Professor Stephen Littlechild. One said: "They have less fire- power than most companies to defend themselves with."
The basic offer from the Scottish firm of 948p per share takes the form of pounds 60.70 in cash and 11 new Scottish Power shares for every 10 Manweb shares. It values the company at pounds 1.02bn while the cash alternative of 915p values Manweb at pounds 1.009bn.
Shareholders may also opt to receive "Exchangeables" for shares in the National Grid Company, which is owned by the 12 regional companies and which may be sold later this year. The Grid Exchangeables would be in lieu of part of the cash.
Scottish Power said that the takeover would leave the enlarged group with gearing of 75 per cent. This compares with 120 per cent gearing in the event of a successful takeover of South Western Electricity by SEI.
Comment, page 17
Takeover fever in the electricity sector has come up trumps again for Schroders, adviser to Manweb, Northern Electric and South Western Electricity Board.
The bank was appointed to Northern after SG Warburg had to stand down when it was taken over by Swiss Bank Corporation. SBC was acting for Trafalgar House in its original bid.
It is hard to pin down how much the banks make on these deals but there is speculation that Warburg made pounds 5m out of its work in defence of Northern before it had to back off.
The Schroders teams advising the companies are all quite separate.
There could be more to come. Schroders also advises London Electricity, which is so far unscathed in the electricity wars.
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