Scottish Wins Southern Water with Pounds 1.6bn Bid
Stevenson, Tom, The Independent (London, England)
Southern Electric threw in the towel yesterday in its attempt to win control of Southern Water when it was knocked out by an audacious counter-bid from ScottishPower. The Southern Water board are expected to recommend the Scots' pounds 1.63bn offer later today.
ScottishPower finally won the day after tabling an unusual two-tier offer that effectively priced its southern rival out of the developing auction. Topping Southern Electric's recent 975p offer, the Scottish company made a final bid of 1,050p but retained the right to increase its offer to 1,100p if Southern or any other party returned with a higher offer.
Southern Electric indicated early in the day that it believed ScottishPower was overpaying for the south coast water company. Henry Casley, chief executive, said: "We are not prepared to overpay. Our offer was a full and fair price and most reasonable people will assume that, with a customer overlap, we can produce more savings than Scottish."
Attention focused on Southern Electric's future as an independent company following its repeated failure to expand its activities over the past two years. Having agreed to a takeover by National Power earlier this year, only to see that deal blocked by the Government, it is widely expected to be the subject of another takeover bid as the electricity industry continues to consolidate.
ScottishPower insisted that the takeover would result in immediate and substantial enhancement of earnings per share and an increase in the rate of dividend growth. Murray Stuart, chairman, said: "We are a builder of businesses and have a clearly focused strategy. Our highly successful integration of Manweb proves that our management team has the expertise to reduce costs, improve efficiency and grow revenues."
ScottishPower promised there would be no compulsory redundancies at Southern Water, as there had not been following last year's hostile takeover of Manweb, the north-west regional electricity supplier, but it insisted that the deal offered substantial cost savings.
It has already announced planned cost cuts of about pounds 63m from the Manweb deal and, while the savings are likely to be more modest at Southern, analysts expect reductions of between pounds 40m and pounds 45m. …