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
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
David Silva strokes home his and City's second goal
Arts and Entertainment
a clockwork orange, stanley kubrick
The Tesco Hudl2: An exceptional Android tablet that's powerful, well-built and outstanding value

Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drinkAuthor DBC Pierre presents his guide to the morning after
Life and Style
food + drink
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas