Bids are flying in the United Kingdom

Bids are flying in the United Kingdom

Southern Co. of the United States has completed a (US)1.7 billion takeover of South Western Electricity (Sweb). Sweb is the first UK electricity company taken over by a foreign entity. The agreement came only after a six-week fight.

This agreement follows a (US)$3.85 billion bid by the Hanson conglomerate for Eastern Group, another UK power company. Manweb, also based in England, is under more pressure to deal with Scottish Power, which has offered (US)$1.54 billion for it.

Southern has indicated that it was attracted to the United Kingdom by its regulatory system, which aims to restrict prices, rather than profits. Southern has been reluctant to explain why it chose Sweb for a takeover bid, but UK analysts say unimaginative management at Sweb probably had much to do with it. Sweb is outperforming government expectations and is financially strong, running in the middle of the pack of 12 regional electricity companies (RECs). With innovative management, there is room for improvement and improving profits, at least Southern Co. hopes there is.

Stock prices for the RECs took off as investors anticipated more action and bidding, with firms such as Houston Industries and Pacific Gas & Electric, both of the United States, expected to enter the fray.

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