ScottishPower set for pounds 4.5bn takeover in US

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The Independent Online
SCOTTISHPOWER is set to unveil a pounds 4.5bn takeover of the US power company PacifiCorp, possibly as early as today.

The deal is the latest in a series of huge transatlantic mergers and will create a multi-utility with a combined value of pounds 12.5bn and interests spanning electricity, water, gas and telecoms.

The two companies were last night finalising the terms of the deal at the London offices of the US investment bank Morgan Stanley Dean Witter, ScottishPower's advisers.

PacifiCorp, which has been codenamed Pegasus during the merger negotiations, is being advised by Salomon Smith Barney.

Although the all-share deal will be presented as a merger, it effectively amounts to a takeover. ScottishPower shareholders will emerge with about two-thirds of the enlarged group and PacifiCorp shareholders one-third.

The deal is expected to value the Oregon-based PacifiCorp at about $7.5bn - a 21 per cent premium to its closing price last Friday night when details of the merger began to leak out in New York.

Ian Robinson, chief executive of Scottish Power, and Murray Head, chairman, will take the same posts in the enlarged group, which will be run from existing head offices in Glasgow.

Shareholders in PacifiCorp will be offered American Depositary Receipts in ScottishPower, which gained a listing on the New York Stock Exchange last year. The group's primary listing will continue to be in London.

This is the third time ScottishPower has attempted to take over an American electricity company and will represent another first for the acquisitive multi-utility.

PacifiCorp, which has headquarters in Portland, has 1.4 million customers and supplies electricity in six US states, including Oregon.

It also has interests in 10,000 megawatts of generating capacity, mainly coal-fired, and owns a number of coal mines. Its revenues last year reached $6.3bn.

The US utility has been vulnerable to a takeover since it lost the bid battle for Britain's Energy Group, owner of Eastern Electricity, and parted company with its chief executive, Fred Buckman.

ScottishPower was the first UK electricity company to take over a regional electricity company, Manweb, and the first to acquire a water company in the shape of Southern Water.

Now it is about to become the first UK utility to conclude a transatlantic merger. PowerGen held lengthy negotiations with Houston Industries about a "merger of equals" but the talks foundered at a late stage over disagreements on valuation and who would run the combined business.

British Energy, the nuclear electricity generator, has also been scouring the US for an electricity company to acquire and National Grid is interested in buying a US electricity transmission and distribution business.

ScottishPower's two previous failed attempts to pull off a deal in the US involved Florida Light and Power and Cinergy, which has a half share in the UK supplier Midlands Electricity. National Power is buying Midlands' supply arm for pounds 180m.

A spokesman for ScottishPower confirmed yesterday that the two companies were in advanced negotiations. Serious talks began with PacifiCorp about a month ago.

Although there is no duplication of activities, ScottishPower nevertheless expects to achieve considerable efficiency savings at PacifiCorp. One observer described PacifiCorp as "undermanaged and unloved" and said ScottishPower would treat the acquisition like a US-version of its Manweb subsidiary.

However, regulatory clearance for the deal is expected to prove a lengthy process because of the number of states that PacifiCorp operates in.

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