Scottish Power in bid spotlight

21 July 2005 – Scottish Power’s plans to unload its US subsidiary PacifiCorp, due to be confirmed at its annual meeting is on Friday, has sparked bid speculation.

The shares advanced a further 83/4 to 504p as dealers reported heavy trading in its options, with one investor buying the right to purchase stock at a price of 600p in September.

The talk was that Scottish Power would make a good fit for E.ON, the energy services group running Powergen, or Germany’s RWE. In the home front, the UK’s Centrica could be another suitor. However, some dealers said any predator might be waiting for it to complete the $9.4 billion sale of its US subsidiary.

Ben Walker, manager of a global utilities fund for Gartmore Investments in London, said, “The sale of PacifiCorp to Buffett has left Scottish Power looking leaner and meaner,” he said. “There are buyers who might be interested in the company’s high dividend yield and modest valuation.”

Further consolidation in the utility sector is never far from investors’ thoughts. Warren Buffett’s acquisition of PacifiCorp and Duke Energy’s takeover of a rival, Cinergy, has led to speculation about who the next target might be in the United States.

Gaz de France has made no secret of the fact that it is on the prowl for acquisitions. With a war chest of more $24 billion, Scottish Power might just fit the bill.