Trafalgar says bid supported

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The Independent Online

Industrial Correspondent

Trafalgar House said it has gained the written support of holders of the majority of shares in Northern Electric to proceed with an offer of £9.50 per share for the electricity firm.

Trafalgar has now asked the Takeover Panel for permission to proceed with the bid following the lapse of its £11 per share offer last week, in spite of opposition from the Northern board.

The announcement came too late last night to have any effect on Northern's share price, which plummeted yesterday by 70p to 738p. Northern has already said that the £9.50 offer "seriously undervalues" the company.

Wyser-Pratte, a US company with a 0.9 per cent stake in Northern, said it had demanded that the company give shareholders the chance to consider the new Trafalgar offer.

Under Takeover Panel rules, Northern's board must agree before the bid can proceed, unless Trafalgar House can gain a dispensation.

It is unclear whether the Panel's executive will be willing to set a precedent by bending the rules.

A spokesman for Northern said: "As far as the Takeover Panel is concerned the bid has lapsed.

"Our major shareholders are perfectly understanding of the board's position [in refusing to agree the bid]," he said. Two of the largest investors, Prudential and M&G, are thought not to have given their written support to Trafalgar House.

Simon Keswick, the chairman of Trafalgar House, said it would be "inconceivable" for Northern's board not to allow shareholders to consider the bid in the light of shareholder sentiment.

Trafalgar also believes it has a unique case as its £11 per share bid had been recommended by Northern and was lapsed only after regulatory threats plunged the electricity industry into turmoil.

Separately it emerged that almost all the institutions that took part in the £4bn sale of the Government's shares in National Power and PowerGen have paid the first instalment of their cost in spite of the anger last week over the drop in the price of the new partly-paid shares.

It is understood that all UK institutions have paid but that a small proportion of US investors have not yet passed the money to the Treasury.

Investors were shocked last week by the threat from the regulator, Professor Stephen Littlechild, that he would tighten controls on electricity distribution prices.

The warning, which came a day after the start of dealings in new National Power and PowerGen shares, wiped £3.5bn from the value of the electricity industry.

Some institutions threatened not to pay when it emerged that the Government was aware of the regulator's thinking before the share sale was finalised. Partly paid shares in the generators have now recovered to trade slightly above the offer price.

The regulatory uncertainty also continued to raise question marks over the proposed sale of the National Grid Company, which is owned by the 12 regional electricity companies and is worth an estimated £5bn.

The companies will meet tomorrow to try to decide a rebate for customers linked to the grid sale that might persuade Professor Littlechild not to clamp down on their prices.

A similar meeting on Friday broke up in disarray.