Sweb still stands firm against 'cheap' US bid

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The Independent Online
Shares in South Western Electricity fell sharply yesterday after the collapse on Friday of merger talks with its larger neighbour, Southern Electric.

Sweb renewed its call for shareholders to reject the existing pounds 1bn bid by Southern Electric International of the US, hinting at an imminent defence package of "sweeteners" which could amount to about pounds 5a share.

Maurice Warren, chairman, said that the defence package - which is nearly finalised - will prove that SEI's pounds 9-a-share offer is an attempt to buy the company on the cheap. He pointed to the sum in excess of pounds 10 a share agreed with Southern of the UK before talks collapsed under the weight of regulatory uncertainty.

His comments were sharply attacked by SEI, which accused him of "Alice in Wonderland logic". Talk of agreed terms with the UK's Southern Electric was meaningless, a spokesman said, since there had been no formal offer. "SEI has made a full and fair offer which remains on the table."

Sweb's shares fell yesterday by 26p to 914p. It is expected that its planned package of shareholder sweeteners would leave the company with gearing in excess of 120 per cent. But it would be less than the 175 per cent which will result from Northern Electric's pounds 5-a-share offering, part of which is to be approved at a shareholder meeting tomorrow.

Sweb said that a number of interested companies were still around in the wake of last week's problems but refused to elaborate.

But there is a widespread view that stock market activity in the sector will slow until the end of the month when the Government decides whether the SEI bid should be referred to the Monopolies and Mergers Commission.

Henry Casley, chief executive of the Southern Electric of the UK, said that the entire regional electricity industry should be referred to clarify the ground rules for takeover and mergers.

"We have learned that change of ownership is no problem but that change in the structure of the industry is a problem," he said.

The industry is also awaiting the views of the watchdog, Professor Stephen Littlechild, on a pounds 2.5bn agreed bid for Eastern Electricity by the industrial conglomerate, Hanson, and on Scottish Power's pounds 1bn offer for Manweb.

Professor Littlechild, who will submit advice on the bids to the Office of Fair Trading, closed his consultation on Eastern last Friday.

o Scottish Power bought 559,000 Manweb shares yesterday, bringing its stake to 14.9 per cent. The shares were bought at 890p, compared with the cash offer of 915p and the cash-and-paper option of 966p.