YOUR MONEY: Stay on board, ready to jump

As bids for utilities multiply, what should small shareholders do? Steve Lodge advises some pointers for investors

NATIONAL Power is offering pounds 2.8bn for Southern Electric. PowerGen is bidding nearly pounds 2bn for Midlands Electricity. North West Water wants Norweb. Scottish Power has successfully pursued Manweb. South Western Electricity and Eastern Group have already sold out ... the whirl of deals and potential deals goes on. What are the millions of individuals who have held these shares since privatisation to make of it all?

At the very least the deals should serve to remind investors what a fabulous investment privatisations have been. Some electricity companies, for example, have quadrupled in price in less than five years.

And for people wanting income from their investments, current privatisation dividends in many cases amount to more than 10 per cent of the flotation price.

Here then are some pointers to getting the most out of the takeovers.

o Another company wanting to buy your shares is almost certainly good news financially. Bids are normally above the current market price. Meanwhile the prospect of a big buyer pushes prices up.

o The flipside of this is that the price of the acquiring company's shares may fall on the announcement that it is bidding for another. "And you tend to find its share price goes to sleep after the deal," says Gareth Hayward, managing director of stockbrokers Waters Lunniss.

o Don't expect every company to be taken over. Size matters. The bigger privatised companies are less likely targets simply because there are fewer companies that could afford them.

o Equally, though, more bids are expected among electricity and water companies. Simply selling your shares in the stock market now may mean you miss out. "If you're a holder, run [your profits]. We appear to be in the middle of the game," says Paul Killik of London stockbrokers Killik & Co.

o Bids involve plenty of paper sent out to shareholders and huge dollops of jargon. Don't worry. You don't have to respond to it immediately, or at all. If you do accept an offer and a higher one comes along afterwards, investors will normally find they still get the benefit of the higher one.

o If you're a shareholder in the company doing the bidding you don't have to do anything.

o Accept a deal if it goes what is termed "unconditional".That means the acquiring company has got hold of 50 per cent of the shares (or acceptances of the offer) and has control of the company. The takeover offer is probably the best value you're going to get and saves on stockbroking charges for selling in the stock market.

o The offer's worth depends on your tax position. For example, deals that involve special dividends can leave higher-rate taxpayers "clobbered", says Mr Killik. And if the offer is cash for your shares, consider whether your profits would make you liable to capital gains tax.

o If in doubt about any aspect of a deal, take advice from a stockbroker.

o If the acquiring company doesn't get the required 50 per cent, the deal doesn't go through. But there's a good chance the offer will have forced the target company to come up with some new benefits for shareholders.

o Equally, don't get upset if your best investment has been taken off your hands. The current takeover fever has driven up many prices to all- time highs. And in most cases investors have almost certainly seen the best of the strong returns from privatisation shares.

Negatives now include the prospect of windfall taxes and other regulatory and political fears. "What started as medium-to-low-risk investments are now medium-to-high," says Matthew Orr, partner at Killik & Co. Also, the stock market itself is close to its all-time high. And the simple fact is that most privatisation investors hold shares in these companies and little else. Those investors are disproportionately exposed to any future price falls. So being able to sell shares at current bid prices without paying stockbroking dealing charges could prove a very convenient exit route.


Company Date Issue Current floated price price*

National Power Mar 91 175p 489p

PowerGen Mar 91 175p 543p

Northern Ireland Electricity June 93 220p 449p

Southern Electricity Dec 90 240p 964p

Yorkshire Electricity Dec 90 240p 916p

Midlands Electricity Dec 90 240p 964p

Eastern Electricity Dec 90 240p 973p

London Electricity Dec 90 240p 911p

East Midlands Electricity Dec 90 240p 902p

South Wales Electricity Dec 90 240p 932p

South Western Electricity Dec 90 240p 900p

Scottish Power June 91 240p 350p

Scottish Hydro Electric June 91 240p 335p

Northern Electric Dec 90 240p 776p

Norweb Dec 90 240p 1086p

Manweb Dec 90 240p 991p

Seeboard Dec 90 240p 503p

South West Water Dec 89 240p 534p

Severn Trent Water Dec 89 240p 655p

Thames Water Dec 89 240p 548p

Southern Water Dec 89 240p 712p

Welsh Water Dec 89 240p 771p

Yorkshire Water Dec 89 240p 654p

North West Water Dec 89 240p 594p

Anglian Water Dec 89 240p 589p

Wessex Water Dec 89 240p 346p

Northumbrian Water Dec 89 240p 1019p

British Airways Feb 87 125p 471p

British Steel Dec 88 125p 181p

British Telecom Dec 84 130p 399p

British Gas Dec 86 135p 265p

* Closing price 4 October. Source: Barclays Stockbrokers

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Bill Gates, founder of Microsoft and co-chair of the Bill and Melinda Gates Foundation
businessUber, Snapchat and Facebook founders among those on the 2015 Forbes Billionaire List
news... and what your reaction to the creatures above says about you
Homer’s equation, in an episode in 1998, comes close to the truth, as revealed 14 years later
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003