Yorkshire Electricity stalked by US giant

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The Independent Online
An American power company is believed to be considering a surprise pounds 1.4bn bid for Yorkshire Electricity, the last but one of the regional electricity companies (RECs) in England and Wales to maintain its independence.

The potential predator is American Electric Power (AEP), one of the largest electricity companies in the US. A successful takeover would leave Southern Electric as the only independent REC among the 12 which were privatised in 1990.

A spokesman for Yorkshire said: "This is still market speculation and it is Yorkshire Electricity's policy not to comment on market speculation."

However, executives were in their offices yesterday as news of AEP's interest broke in a Sunday newspaper, fuelling speculation that discussions are under way and that an announcement one way or the other may be out this week. Yorkshire is advised by Rothschild.

The report claimed an offer of 860p a share in cash was expected, though this is a premium of only 42.5p to Friday's closing price. The shares were up 3.5p at the close on Friday at 818.5p, well below the 1996 high of 898p. Analysts have not expected a bid so close to a general election as it would be touch and go whether the present Government could approve it before polling day.

It would probably take an agreed bid on the table within days to have much chance of squeezing through, and it is thought unlikely that Yorkshire would succumb to the first offer. Most electricity companies have been sold after considerable haggling about the price.

Yorkshire Electricity, whose chief executive is Malcolm Chatwin, has insisted in the past that the company will not agree to informal talks and will only meet a potential predator if an offer is put first in writing.

Labour has been hostile towards the merger boom in the electricity sector, and might find a way to refer a bid for one of the last two independent RECs if it forms the next government.

However, a referral would not be straightforward, because it is hard to see how it could be justified on competition grounds when a bid comes from an electricity supplier abroad.

Labour has also reportedly backed away from plans to impose a public interest test on mergers, another way Yorkshire could be referred.

Of the RECs, Northern, East Midlands, South Western, London, Seeboard and Midlands have been taken over by American companies.

Electricity companies snapped up by UK predators include Manweb, which went for pounds 1.1bn to ScottishPower, Eastern, which went to Hanson for pounds 2.5bn, Norweb, which went to North West Water for pounds 1.8bn, and Swalec, bought by Welsh Water for pounds 872m.

Leeds-based Yorkshire Electricity has been seen as a takeover target for some time, although last year Christopher Hampson, the chairman, said he saw no competitive disadvantage in staying independent.