White knights surround Sweb

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The Independent Online
South Western Electricity, the target of a pounds 1bn takeover bid by Southern Electric International of the US, is thought to have been inundated by potential "white knights" in the UK and overseas. The company declined to comment on the suitors, which are likely to include larger regional electricity companies including Southern Electric of the UK.

Launching the company's initial defence, Maurice Warren, Sweb's chairman, said: "There has been a lot of interest in the situation." But he added: "The board is confident in its ability to deliver value to shareholders as an independent company well in excess of the SEI offer."

Mr Warren said the pounds 9-per-share offer significantly undervalued Sweb. He promised to outline plans to enhance shareholder value soon. The company is thought to be working on a package of sweeteners which could be worth as much as the pounds 5 per share offered by Northern Electric in defence of an earlier bid by Trafalgar House.

It is believed that Sweb is prepared to gear up its balance sheet substantially beyond the 60-70 per cent it had previously envisaged. SEI has already said that the company it would form as the takeover vehicle for Sweb would have a gearing of about 120 per cent.

Mr Warren said the US group needed Sweb to complement "slow-growing" businesses in North America and to gain experience in working within the regulatory system in the UK.

"It is clear that Southern's offer does not reflect the economic value of Sweb, let alone its strategic importance to the group," he said.

The company's shares fell by 9p yesterday to 909p.

John Seed, chief executive, said that he would not welcome a reference of the bid to the Monopolies and Mergers Commission. "We believe we can justify our independence without using the MMC as a route to obtain it," he said.

Separately, it emerged that Scottish Power, which has launched a pounds 1bn bid for Manweb, has increased its stake in the regional electricity firm to 12.5 per cent. There is speculation that this bid will be referred to the MMC. Manweb's shares fell by 12p yesterday to 897p.

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