ScottishPower insists race 'not over yet'

ScottishPower yesterday re-inforced expectations that it will raise the stakes in the bid battle for Southern Water by insisting that the race with the rival bidder Southern Electric was "not over yet".

The comment came as another water company on the receiving end of two hostile bids - South West Water - marshalled its defences with a 12 per cent increase in the dividend and a pounds 10-a-head rebate for customers.

A spokesman for the ScottishPower camp said: "We set out with the intention of securing agreement of the board. We still want to acquire Southern Water. There is a recommended alternative offer on the table. We are reviewing our options."

On Wednesday, ScottishPower's pounds 1.56bn bid for Southern was topped by an agreed pounds 1.6bn offer from Southern Electric, valuing the water company at pounds 10.03 a share. Southern Electric's cash offer is worth 975p a share.

The expectation in the market is that Scottish Power may have to raise its cash offer to pounds 10 but Scottish has insisted that it will only rebid on terms that create value for its shareholders.

Southern Electric hit back at the latest fighting talk from the Scottish camp, saying: "They can huff and puff as much as they like. The simple fact is that we have a higher and agreed offer on the table."

Meanwhile South West pledged that it would continue to deliver value for customers and shareholders in the face of the "unsolicited and unwelcome" bid approaches from Wessex Water and Severn Trent.

The two bids will not be ruled on by the Monopolies and Mergers Commission until the end of September and it is likely to be November before the water industry regulator, Ian Byatt, has decided what level of customer rebates he will require in return for allowing either bid.

South West has begun building its defences, posting a 10 per cent increase in pre-tax profits before exceptional restructuring costs to pounds 109m and announcing a more generous dividend policy. The company had been committed to raising the payout by 3-4 per cent a year in real terms but yesterday indicated that this would now be lifted to 5-6 per cent.