Southern Electric extends offer for Sweb
Wednesday 23 August 1995
Southern Electric International of the US has extended its pounds 1bn offer for South Western Electricity to 4 September, having so far received acceptances covering 1.3 per cent of the shares.
SEI, which already owns 14.4 per cent of Sweb, is awaiting the Government's decision on whether to refer the bid to the Monopolies and Mergers Commission, which could come as early as today.
The Department of Trade and Industry has until 1 September to deliver its verdict on a referral, but industry sources believe it is imminent. Sweb, poised to offer shareholders sweeteners worth about pounds 5 a share to reject the bid, will have two working days after any government announcement to give details of its last-ditch defence.
Some City analysts believe that, in the absence of a referral, SEI could win Sweb at little more than the pounds 9 a share on offer. Sweb's shares rose 2p yesterday to 914p.
The situation is being keenly watched by Hanson, which has tabled a pounds 2.5bn agreed offer for Eastern Electricity, and by Scottish Power, which has launched a pounds 1bn hostile bid for Manweb.
City analysts believe that the proposed deal by Scottish Power is the most likely to be referred as it is the first within the industry. There is also a view that it could be referred because of Scottish Power's structure: unlike the regional companies in England and Wales, it generates power as well as distributing it over the wires and selling it to consumers. The Government opted to split generation from distribution and supply before privatising the industry south of the border.
The Office of Fair Trading, which takes advice from the industry regulator, Offer, has yet to make its recommendations to the Government on the Hanson and Scottish Power bids. Professor Stephen Littlechild, director general of Offer, called for an earlier bid by Trafalgar House for Northern Electric to be referred. He was overruled by Michael Heseltine, then President of the Board of Trade.
Scottish Power argues that none, or all, of the proposed takeovers should be referred. It fears that if it is singled out, a rival bidder with few or no existing UK operations could swoop on Manweb.
The company is believed to fear a counter-bid from a European company which may fall under the jurisdiction of the competition authorities in Brussels. Any investigation by the European Commission would almost certainly be quicker than an MMC inquiry.
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