bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

SCMP Reporter

LONDON: Northern Electric has bowed to a GBP1.23 billion (about HK$15.5 billion) takeover bid by Trafalgar House after Britain's electricity regulator pulled the plug on Northern's best defence.

  In what one analyst called a bizarre sequence of events, Northern said it was forced to raise the white flag after the industry's chief regulator, Stephen Littlechild, said he was considering introducing new caps on power supple charges.

  The battle for Northern has been at times extremely bitter, with the Trafalgar battle led by chairman Simon Keswick.

  Northern, which had fought vigorously to remain an independent utility, said the regulator's announcement left the company unable to know for sure if it could deliver promised increases in dividend results and cash payouts to company investors.

  Northern said it would recommend that shareholders accept Trafalgar's cash offer to shareholders of GBP11 a share, which is due to expire tomorrow.

  'It's got to be the only way they [Northern] see shareholders getting GBP11,' said Liz Christie, a utilities analyst at Goldman Sachs.

  That could mean Northern will become the first of the 12 cash-rich electricity distributors in England and Wales to be taken over since the government sold the industry to investors in 1990.

  'The question now is, does Trafalgar want it?' said Nigel Hawkins, a utility analyst at Hoare Govett.

  Trafalgar still can walk away from the offer, and Mr Littlechild's statement earlier yesterday left doubts about the value of Northern and other electricity companies, analysts said.

  Trafalgar's bid is contingent on reaching agreement with Mr Littlechild on terms of a new Northern operating licence, which it would need to conclude by March 31.

  Trafalgar officials could not be reached for comment. Before Northern gave in, Trafalgar had reaffirmed its plan to seek acceptances for its cash offer by tomorrow.

   Mr Littlechild's announcement took the industry by surprise, and erased GBP2.9 billion of market capitalisation as share prices fell.

  The FT-SE index of 17 British electricity stocks fell 11.30 per cent to 2,137 points, down 272.2, led by declines of more than 20 per cent for the South Western, Yorkshire and East Midlands units.

  'It is possible he may do nothing, but he has frightened the hell out of everybody with this,' said Ms Christie.

  Northern had hoped to thwart Trafalgar by offering shareholders GBP5 in special dividends. It was going to use its debt-free balance sheet to borrow heavily to make the payments.

  That proposal was a key reason for Mr Littlechild reaching his decision that perhaps he had been too lax in setting new price caps, due to take effect on April 1 and continue into 2000.

  'It seems to me there is some evidence that [the proposed regulations] may not have been as sufficiently tight as they ought to have been,' the regulator said.

  He said any changes would be revealed by June and not take effect until April next year, a move which did not help Northern, which said the regulator's statement made it impossible to know its financial position.

  Mr Littlechild's announcement 'does not make clear whether or when there will be a further tightening of price control nor does it make clear the extent of any tightening,' Northern said.



Northern bows to Trafalgar bid