Rebels draw blood at Northern

BY MARY FAGAN

Industrial Correspondent

Dissident shareholders in Northern Electric failed in their efforts at an extraordinary general meeting to force the company to allow an immediate renewed bid by Trafalgar House, but claimed the management's authority had been dealt a swingeing blow.

Votes representing 22 million shares were cast in favour of allowing a new bid to proceed and 39 million against. Despite intensive lobbying against the resolution by Northern's board, investors representing 45 per cent of the shares chose to abstain rather than give positive support.

A source at one City institution said: "If I was Northern's management, I would not feel confident that the majority of shareholders are happy with me. The message is clear."

The meeting in Newcastle also drew criticism of the company by some small shareholders, one of whom attacked the directors as "fat cats" - to applause from the audience - and urged them to resign. Despite that, about 500 of those attending the meeting voted in favour of Northern while about 50 supported the rebel camp.

A spokesman for Northern said that the meeting represented "a clear and substantive victory". "We are really very pleased," he said.

David Morris, Northern's chairman, reiterated promises to shareholders that a fresh bid by Trafalgar would ultimately be allowed, but not until Offer, the industry watchdog, makes clear its position on expected changes in electricity price controls. An announcement by Professor Stephen Littlechild, director-general of Offer, is expected at the end of June.

Northern had earlier this year blocked attempts by Trafalgar to offer pounds 9.50 a share for the company after an pounds 11-a-share bid lapsed in March. The company at that time cited regulatory uncertainty as an important reason for refusing to allow a renewed bid to proceed. Yesterday, Mr Morris revealed for the first time that the defence against Trafalgar has so far cost about pounds 10m in advisers' and legal fees.

Guy Wyser-Pratte, the US investor who put forward the resolution for a new bid, hailed the confirmation that a bid could go ahead as a significant breakthrough. Mr Wyser Pratte, who spent many thousands of pounds to stage the EGM, said: "I feel quite fine. The board has adopted our position 100 per cent."

He added: "I feel fully vindicated. In the absence of our intervention, this would never have occurred. It is a very firm shift on their part."

Speaking as he prepared to fly back to New York, Mr Wyser-Pratte accused the Northern board of "wriggling" under pressure. "The board does not know what it is doing," he said.

Trafalgar House declined to comment. The group, while understood to be keen to come back with a fresh offer, is wary of Professor Littlechild's stance. The regulator has been secretive about the new price controls, which are expected to be tough, and there is speculation whether some of the regional electricity companies might refuse to agree to his verdict and thus be referred to the Monopolies and Mergers Commission.

Mr Morris also told shareholders yesterday that the company remained committed to implementing "to the fullest possible extent, and as soon as possible" a package of sweeteners worth pounds 500m, offered as part of its defence against the original Trafalgar bid.

"However, until the exceptional regulatory uncertainty which presently exists is removed and we can then see the impact upon the company, we are not able to quantify the exact final value of the package."