Trafalgar ends Northern siege

Chief executive denies that financial weakness prompted the climb- down

MARY FAGAN AND

TOM STEVENSON

Fresh doubt was cast on Trafalgar House's financial position yesterday as it ended its siege of Northern Electric with the announcement it would not make a fresh bid following the lapse of an pounds 11-a-share offer in March. Sources close to the com pany said it had been unable to underwrite an offer for Northern, which could have cost up to pounds 1bn.

Trafalgar, which has spent pounds 12m pursuing its target, denied financial weakness had been a factor in its climb-down. It blamed the recent clamp- down on electricity prices by the Offer watchdog, Professor Stephen Littlechild, which it said had diminished the attraction of Northern.

"It is not a case of problems with funding, we were supported by our underwriters - SBC Warburg and Hong Kong Land - up to the last minute," Nigel Rich, chief executive of Trafalgar House, said.

Mr Rich said Trafalgar would concentrate on "getting its house in order", including action to turn around the loss-making Cunard cruise-liner business.

"Once we are in control of our existing businesses Trafalgar can then re-visit acquisition possibilities at the right moment. I think the reason we originally bid - to acquire a stable UK source of earnings - is sound."

When Trafalgar first bid for Northern last December, the move was widely seen as a piece of financial engineering, designed to bolster weak trading at the company's engineering, construction and leisure operations with a regional elect ricity company's reliable cash-flow and earnings stream.

The deal would also have eased an advanced corporation tax millstone, caused by Trafalgar's shortage of UK-based earnings.

Problems at the group were highlighted in May when it announced a larger- than-expected loss of pounds 48.2m. A disastrous cruise on the Cunard subsidiary's QE2 liner, problem contracts in the engineering division and the costs of chasing Northern all contributed to the poor figures.

Mr Rich said yesterday: "I want to make the point that Trafalgar has businesses which are capable of making money if run properly. I am determined to prove that. You cannot do it overnight, it will take time."

Trafalgar's shares closed 2p lower yesterday at 41p, well below the 76p at which they were trading in December when the bid was launched.

Mr Rich's comments came almost exactly a year after he became chief executive of Traf algar House.

A former managing director of Jardine Matheson, he was installed by Hong Kong Land which had moved into the UK conglomerate in 1992, hoping to use it as a European base following the Chinese takeover of the colony in 1997.

Trafalgar's decision is the latest dramatic move in the takeover fever sweeping the regional elecricity sector.

The group started the frenzy last December and was only foiled in its bid when the industry was plunged into chaos in March by the sudden prospect of a new review of electricity prices.

In the weeks since Professor Littlechild announced the results of the review, three bids for regional companies have been made: Southern Electric International of the US has launched a pounds 1bn hostile offer for South Western Electricity, Manweb is fighting off a pounds 1bn bid by Scottish Power and Eastern Electricity has recommended a pounds 2.5bn takeover by Hanson.

Mr Rich said the rush of bids had changed the situation and forced Trafalgar to "evaluate the price at which we could succeed

"When you think of the money now on the table - which essentially would come from cash resources - it puts a lot of cash into institutions and reduces their exposure in the sector. The question you must then ask is whether their desire to hang on to the stock gets greater with each bid."

Shares in Northern jumped 9p to 905p as the market speculated that a rival bidder would step into the gap left by Trafs. Northern said it had had no other approaches.

David Morris, chairman, said he wanted to focus on running the business and on delivering the pounds 550m package of sweeteners for shareholders proposed as part of its defence.

Start your day with The Independent, sign up for daily news emails
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
news
PROMOTED VIDEO
News
i100
Sport
Alexis Sanchez missed a penalty before scoring the opening goal with a header at the back post
footballLive! Sanchez makes up for penalty miss to put Arsenal ahead
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
Sport
Rooney celebrates with striker-partner Radamel Falcao after the pair combine to put United ahead
footballManchester United vs Newcastle match report
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all