Texas set to trump Pacificorp offer for Energy this week

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The Independent Online
TEXAS Utilities is expected to bid 800p a share this week for Energy Group, formerly Hanson's energy division, in a last- minute bid to trump the existing 765p a share offer from another US group, Pacificorp.

Pacificorp's bid was given the green light earlier this month by regulators both in the US and UK.

In practice, analysts say Texas has until 9 March, the first closing date for the Pacificorp offer in the US, to make a rival offer or see Pacificorp start winning approval by default. Texas last week secured permission to bid from the Texas Public Utility Commission.

Texas has also lined up the sale of Peabody, Energy's US coal-mining business, to Lehman Merchant, the development capital arm of its financial advisers Lehman Brothers. Texas wants to make the $1.6bn (pounds 970m) sale in order both to help finance the offer and also to avoid referral to the US Federal Trade Commission, and the delays that would cause.

If Texas puts an offer on the table for Energy in the next 10 days it could be followed by an offer document within a week, according to City sources, and the deal could go through in the next two to three months.

Texas has studied the report of the Monopolies and Mergers Commission (MMC), which last year cleared Pacificorp to bid for Energy, and will frame its own bid to meet those criteria. Advisers to Texas admit, however, that any decision to refer its bid to the MMC would be fatal: shareholders in Energy would be unlikely to wait six months to win the approval of the MMC in the hope of securing an extra 5 per cent from Texas.

Texas rejects rival claims that it would be unable to raise the $6.75bn cash needed to finance a counter-bid without a massive rights issue. It argues that it is a bigger and financially stronger company than Pacificorp and that it could quickly raise thebank finance to mount a bid and replace it later with equity.

Texas has also indicated itwould want Energy's chief executive, John Devaney, and finance director, Eric Anstee, to stay after a takeover. Pacificorp had offered Mr Devaney the post of chief operating officer of the combined group.

Merrill Lynch and Lehman Brothers are advising Texas on its proposed bid.

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