Pressure is growing to stall pounds 1.6bn merger deal inyes

North West Water bid: MPs, unions and customers united in opposition to takeover plans which will result in serious job losses

MARY FAGAN

and COLIN BROWN

Ian Lang, President of the Board of Trade, was under mounting pressure last night to stall a pounds 1.6bn takeover bid by North West Water for Norweb, the electricity company.

Downing Street sources said the Prime Minister, John Major, would call for a report on the bid from Mr Lang, which could be raised at a special Cabinet meeting next Wednesday.

The Government's only power to halt the bid, which was opposed by Norweb management, would be to ask for an inquiry by the Monopolies and Mergers Commission. "The fact that it is now a hostile bid makes it more likely there will be a reference," another Whitehall source said. "There is nothing against the merger of two companies from different industries, so it will be a political decision. But it is likely."

The bid was criticised by MPs from all sides, by unions which predicted thousands of job losses, and by consumer groups. Benefits for consumers from the expected cost-savings will be delayed beyond 2000.

Demands for the takeover to be blocked were led by John Redwood, the former Cabinet minister who challenged Mr Major for the leadership. Mr Redwood warned the Government against allowing "two powerful monopolies" to "gang up against the customer".

Labour and the Liberal Democrats also called for a reference to the MMC if the bid is pursued. Jack Cunningham, Labour's Trade and Industry spokesman, warned: "A Labour government would not allow such a state of affairs to arise."

The takeover bid is embarrassing for the Government, on the defensive over criticism of the privatisation of the water industry following shortages in the recent drought, and over the row about "fat cat" salaries for utility bosses. Norweb said the offer undervalued the company.

Sir Desmond Pitcher, chairman of North West Water, said the proposed deal is "logical and attractive" and the price on offer was "very fair". He said the benefits for customers would be "powerful" as a result of increased efficiency.

The company said that as shareholders are to foot the bill for the acquisition they are entitled to see a return before customers gain through reduced charges.

Sir Desmond said: "Customers beyond 2000 will have lower bills than if they stayed as two companies." He added: "There will be job losses. We are not hiding from that fact."

Many are likely to be among the 4,000 workers from the two companies which North West would put into a central "facilities management" company.

Unions claimed the planned merger could mean more than 2,000 job losses. Joan Fletcher, head of electricity for the union Unison in the North West, said: "Water and electricity are being thrown into the money markets for gain."

Ofwat and Offer, whose views are crucial to whether the bid will succeed, will issue a joint consultation document early next week.

Anthony Goldstone, chairman of the Ofwat consumer body in the North- west region, called for regulators to be given more powers so they could give the public extra protection if the merger went through.

Under terms of the bid, Norweb's shareholders are being offered pounds 9.75 in cash or pounds 10.15 in a mixture of cash and shares. Norweb's share price soared yesterday by 33p to pounds 10.08 while North West Water's shares rose by 5p to pounds 6.16.

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