NORTHERN Electric is braced for a hostile #1.25bn bid this week from
Ritz hotel to Cunard ships group Trafalgar House.
A bid would be the first in the utilities sector since privatisation
in 1990 and it is thought such a move would encourage further bids and
mergers between the electricity companies.
Trafalgar House, whose other interests include engineering and
construction, announced last week it was considering launching an offer
for the Newcastle upon Tyne-based electricity group which serves 1.4
million customers.
Northern is likely to put up fierce resistance to such a bid and a
takeover battle could last for months.
City analysts will be particularly keen to learn how Trafalgar House
will finance a possible takeover.
Last week, chairman Simon Keswick ruled out a cash-call on
shareholders. The company launched its last fund-raising exercise just
over a year ago.
The group also showed it had stormed back into profit after three
years of losses.
Huge write-offs during the 12 months to the end of September 1993
resulted in the group plummeting to a pre-tax loss of #347m, the worst
in the group's history.
Those losses compared with the golden days of the 1980s and in 1989 in
particular, when it made taxable profits of #270m.
Latest annual results show the group made a pre-tax profit of #45.6m,
showing its recovery is well on course.
City analysts believe tax advantages and strong cash flow lie behind
Trafalgar's aim to take over Northern.
The huge property write-offs detailed in last year's results led the
group to put the Ritz and Cunard up for sale but no suitable buyers
emerged.
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