Texas bags Energy Group

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The Independent Online
THE year long-battle for control of Energy Group, owner of Eastern Electricity, finally came to an end yesterday after PacifiCorp dropped out of the bidding, leaving Texas Utilities to clinch the takeover with a pounds 4.45bn recommended offer.

The outcome prompted immediate speculation that the defeated bidder might turn its sights on another UK electricity company and shares in both PowerGen and National Power rose sharply.

PacifiCorp, which began the takeover tussle with a pounds 3.9bn bid last June, withdrew after the Takeover Panel intervened by ruling that the two US utilities had to submit sealed bids to decide the outcome of the contest.

There was confusion and irritation in the City as to why PacifiCorp had not pulled out earlier. The winning bid from Texas is worth 840p a share compared with the 820p offered by PacifiCorp, which was advised by Goldman Sachs.

Last night, PacifiCorp said it had decided not to increase its offer because it did not see "acceptable financial returns to PacifiCorp shareholders at values in excess of 820p."

One analyst, expressing a widely held view, said: "If that was the case why did they not pull out 10 days ago when Texas was cleared by the competition authorities to bid at 840p a share?"

Erle Nye, chairman of Texas Utilities, said he was pleased that the higher offer had prevailed. The Energy Group, led by chairman Derek Bonham, urged shareholders to accept the Texas offer as soon as possible. The offer closes on 19 May.

Energy Group, which also owns the US coal producer Peabody, which Texas has agreed to sell to Lehman Merchant Banking Partners for $2.3bn. There are rumours that PacifiCorp may seek to acquire Peabody as a consolation prize.

The conclusion to the long-running bid contest will make Eastern the eighth British regional electricity company to be taken over by an American utility. John Devaney, the executive chairman of Eastern, will be offered a senior position by the new owners but he is not expected to stay with the Energy Group.

Sources in the Texas camp suggested that PacifiCorp may never have intended to raise its offer but by holding off making an announcement was simply trying to "spoof" Texas into bidding against itself. A PacifiCorp spokesman denied this.