The energy regulator Ofgem yesterday warned the Spanish company Iberdrola, which is considering a bid for Scottish Power, that it had strong measures to prevent asset stripping. There are fears that Iberdrola might involve private equity interests in its £12bn approach for Britain's fifth largest energy supplier.
A spokesman for the Bilbao-based power group, whose shares rose nearly 20% when rumours of a takeover emerged on Wednesday, said: "We have not presented a bid although we are studying that possibility."
A regulatory filing to the Madrid stock exchange by Iberdrola said it was "evaluating different alternatives for investment" but insisted that no definite decisions had yet been taken and did not mention Scottish Power.
But an Ofgem spokesman said: "We cannot stop equity houses taking control but we do have measures in place to stop the stripping of assets and ensure that customers do not suffer from a reduction in [service] reliability."
Meanwhile, RWE, the German power company that controls npower in Britain, fuelled speculation over the bid by saying it was keen to grow its UK business and was interested in power generating assets.
Chief executive Harry Roels said, however, he would not be be drawn into any bidding war that would force it to pay too much. Other big power firms such as Gazprom of Russia, EDF of France and E.ON of Germany are seen as potential buyers of Scottish Power although none is likely to want to top a £12bn offer from Iberdrola.
Iberdrola is understood to have talked about a possible move at 800p a share amid speculation that the Spanish firm would work in tandem with private equity backers.
Among the mechanisms that Ofgem says are available to prevent any problems from a highly leveraged bid is a "cash lockdown". This ensures that parent companies of UK utilities which get into financial trouble cannot drain cash out of their British businesses, it says. Iberdrola has set its sight on Britain's fifth largest utility because Spanish markets are saturated, say local analysts. A move to "bulk up" is seen also as an effective way to fend off hostile takeover bids from abroad, such as E.ON of Germany's play for Spain's number one power company, Endesa.
British companies are juicy targets for the Spanish because the UK market is almost the only one in Europe that does not put political hurdles in the path of foreign purchases, said Robert Tornabell, professor of finance and former dean of Esade business school in Barcelona.
Iberdrola, one of the world's leaders in windpower, is also interested in Scottish Power's wind farms in the US, Mr Tornabell said. The company emphasises its "green" image in television advertising and has recently invested € 3bn in Gamesa turbines and wind farms in the US.
But the Iberdrola's interest in Scottish Power is also driven by a corporate struggle between the chief executive of Iberdrola, Ignacio Sánchez Galán, and one of the company's largest shareholders, the construction firm ACS, which is led by former Real Madrid president Florentino Pérez.
Mr Pérez bought a 10% stake in Iberdrola after acquiring a controlling stake in a competitor Union Fenosa, planning to merge the two companies.
Source: The Guardian
A spokesman for the Bilbao-based power group, whose shares rose nearly 20% when rumours of a takeover emerged on Wednesday, said: "We have not presented a bid although we are studying that possibility."
A regulatory filing to the Madrid stock exchange by Iberdrola said it was "evaluating different alternatives for investment" but insisted that no definite decisions had yet been taken and did not mention Scottish Power.
But an Ofgem spokesman said: "We cannot stop equity houses taking control but we do have measures in place to stop the stripping of assets and ensure that customers do not suffer from a reduction in [service] reliability."
Meanwhile, RWE, the German power company that controls npower in Britain, fuelled speculation over the bid by saying it was keen to grow its UK business and was interested in power generating assets.
Chief executive Harry Roels said, however, he would not be be drawn into any bidding war that would force it to pay too much. Other big power firms such as Gazprom of Russia, EDF of France and E.ON of Germany are seen as potential buyers of Scottish Power although none is likely to want to top a £12bn offer from Iberdrola.
Iberdrola is understood to have talked about a possible move at 800p a share amid speculation that the Spanish firm would work in tandem with private equity backers.
Among the mechanisms that Ofgem says are available to prevent any problems from a highly leveraged bid is a "cash lockdown". This ensures that parent companies of UK utilities which get into financial trouble cannot drain cash out of their British businesses, it says. Iberdrola has set its sight on Britain's fifth largest utility because Spanish markets are saturated, say local analysts. A move to "bulk up" is seen also as an effective way to fend off hostile takeover bids from abroad, such as E.ON of Germany's play for Spain's number one power company, Endesa.
British companies are juicy targets for the Spanish because the UK market is almost the only one in Europe that does not put political hurdles in the path of foreign purchases, said Robert Tornabell, professor of finance and former dean of Esade business school in Barcelona.
Iberdrola, one of the world's leaders in windpower, is also interested in Scottish Power's wind farms in the US, Mr Tornabell said. The company emphasises its "green" image in television advertising and has recently invested € 3bn in Gamesa turbines and wind farms in the US.
But the Iberdrola's interest in Scottish Power is also driven by a corporate struggle between the chief executive of Iberdrola, Ignacio Sánchez Galán, and one of the company's largest shareholders, the construction firm ACS, which is led by former Real Madrid president Florentino Pérez.
Mr Pérez bought a 10% stake in Iberdrola after acquiring a controlling stake in a competitor Union Fenosa, planning to merge the two companies.
Source: The Guardian
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