Trafalgar's bid support grows
Monday 13 March 1995
Institutions holding more than one third of Northern Electric's equity are backing attempts by Trafalgar House to relaunch its bid for the electricity firm at £9.50 per share following the lapsing of its £11 offer last week. Trafalgar said that 50 institutions representing 35 per cent of Northern had signed documents in support of a fresh bid, and that others were pressurising Northern's board.
On Friday the board of Northern Electric rejected proposals for a £9.50 offer saying it "seriously undervalues" the company. Trafalgar now plans to ask the Takeover Panel to take the unprecedented step of allowing a new bid to proceed almost immediately without the consent of Northern's board.
Trafalgar will argue with the Panel that the £1.23bn offer of £11 per share had been recommended by Northern and was lapsed only because the electricity industry was plunged into turmoil last week by threats of a clamp-down on prices by the regulator, Professor Stephen Littlechild, which wiped £3.5bn off the value of the sector.
A spokesman for Northern said: "The rules are the rules. What they are saying is that they would like to come back again tomorrow with a hostile bid. The rules say that they cannot do that for another 12 months." He added that the Northern board would resist any pressure to consent to the lower bid. The company believes that until Professor Littlechild clarifies his intentions, it has insufficient information to evaluate any bid.
Professor Littlechild will announce on 24 March whether he will go ahead with a new review of electricity distribution prices, agreed with the industry only last August. If, as is widely expected, he proceeds, the results are unlikely to be known until June.
One City analyst said last night: "All this really becomes a sophisticated form of gambling. This Littlechild thing could roll on for six months."
Separately, top executives of the 12 regional companies are attempting to come to agreement on a compromise to put to Professor Littlechild, which could include a promise of £50 customer rebates. However, the City believes that this will not satisfy the regulator. A one-off rebate would not address his concern at the companies' financial strength and their ability to buy back shares and grant shareholders special dividends.
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