South Western Electricity yesterday agreed a new pounds 1.1bn offer from the American by Southern Electric Internat- ional. The terms, which include the payment of a special dividend, have been raised from 900p to 965p a share, seven weeks after the American's first raid on the UK firm.
The US group followed its announcement with a stock market swoop on Sweb's shares spending about pounds 166m to take its stake to 29.9 per cent from 14.4 per cent. The shares were bought at the pounds 9.65 offer price compared with Sweb's closing price last night of pounds 9.51, up from pounds 9.12.
The deal sparked a political furore when it emerged that Sweb chief executive, John Seed, who will retire, could make about pounds 770,000. The sum includes compensation for his two-year rolling contract at an annual salary of pounds 177,000, as well as profits from the exercise of share options and the sale of his existing shares.
The agreement prompted Scottish Power, which is locked in a pounds 1bn hostile bid battle for Manweb, to seek fresh talks for agreement,which was immediately rebuffed. Scottish Power said yesterday that the Sweb bid price makes it own offer for Manweb appear generous. Scottish Power is offering pounds 9.15 in cash with a cash-plus-shares alternative of about pounds 9.76 at the present market price.
The takeover by Southern Electric International could yet founder if the Government decides to refer it to the Monopolies and Mergers Commission. The parties had hoped for clearance by yesterday but the Department of Trade and Industry has until 1 September to decide.
The DTI may wait to announce its views along with those on the Scottish Power/Manweb case - on which the Office of Fair Trading has yet to advise - and on the pounds 2.5bn agreed bid for Eastern Electricity by Hanson. The bid for Manweb is regarded as the most likely to be referred. But some analysts said that the Government could send all three to the Monopolies and Mergers Commission to establish some rules for the sector as a whole. Tom Boren, president of Southern Electric International, said: "We see no competition reasons that would cause this bid to be referred." He also said that Sweb's customers would enjoy continued focus on value for money and high standards of service.
Under the terms of the agreement, both Mr Seed and Sweb's chairman, Maurice Warren, will retire. A new chief executive officer will be appointed from SEI's parent, the US Southern Group. Mr Boren said, however, that he had "tremendous respect" for Mr Seed and hoped that he would act as a consultant to Sweb.
The takeover battle has cost Sweb about pounds 10m in fees for its various advisers and consultants. Mr Boren said that SEI's bill is similar "plus or minus 10 to 15 per cent".
The acquisition is expected to accelerate job-cutting plans at Sweb, which previously aimed to reduce the workforce by about 500 by the end of the decade. Mr Boren reiterated his view that the US utility can make available to Sweb "expertise which it does not have at present".
The offer of pounds 9.65 compares with the "north of pounds 10" which Sweb said had been agreed in talks with neighbouring Southern Electric of the UK, which then collapsed.
The offer consists of pounds 9 in cash plus a 65p special dividend which is payable when the deal goes through. Some shareholders will be entitled to claim a tax credit relating to the special dividend, which would bring the total to pounds 9.81.
Shareholders will also receive the Sweb final dividend of 20.3p, payable on 2 October.
About 100,000 private shareholders have an average 200 to 250 shares in Sweb, which they can now cash in for about pounds 2,000 to pounds 2,500.
A potential stumbling block for SEI is the Sweb stake of 6.3 per cent in the National Grid Company, which is expected to be floated later this year, raising an estimated pounds 4bn. The Government wants the regional electricity companies to dispose of their stakes, but Mr Boren made it clear he would like SEI to retain some holding.
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