Ground-breaking work by Linklaters & Paines on the Trafalgar House bid for Northern Electric is likely to have laid down the technical legal path regarding further bids for regional electricity companies (RECs).
The bid has gone to the Northern shareholders, who will decide on 10 March whether to accept the improved offer of u11 cash or equivalent cash and paper.
However, the most important legal hurdles have been jumped in what is, as the first contested bid for a REC, a highly politicised deal. The Department of Trade and Industry has ruled against any referral to the Monopolies and Mergers Commission (MMC) despite the electricity industry regulator Offer originally favouring it.
However Offer's concerns about the behaviour of future owners, including its desire for transparency of the electricity firms finances, is to be met by Trafalgar's giving of undertakings on such matters.
Chris Bright, Linklaters' regulatory partner in the team headed by Charles Allen-Jones, says the bid defence focused on regulatory rather than market issues. “There's no doubt that the regulatory work has set a track for other bids by non-industry players for electricity companies. One would expect them not to go to the MMC, and the regulators to take assurances about the way the business will be run.
“We will eventually produce fairly detailed assurances. These will set the groundwork for similar bids,” he says.
He adds: “The interesting thing for the future is how intra-industry mergers will be dealt with, with electricity companies bidding for each other.”
Another major hurdle was to overcome the 'golden share' restriction that limits shareholding to 15 per cent. The golden share restriction ends on 31 March, but it had been believed that bids could not be made much before that date. Trafalgar's original assault came in December.
Commenting, Herbert Smith partner Stephen Barnard says: “All the RECs are under some form of bids threat. What's happened with Northern will be relevant in the future, especially the attitude of Offer and the DTI.”
Herbert Smith has particular experience in the sector – the firm handled the privatisation of the 12 RECs and is currently advising them alongside bankers Kleinwort Benson on the possible future of their shareholdings in the National Grid.
Northern Electric's corporate lawyers are Newcastle-based Dickinson Dees. Slaughter and May are handling the defence work, with head of corporate finance Michael Pescod leading the team. Pescod declined to comment.
Dickinson Dees managing partner Graham Wright says his firm is assisting the defence effort.
Both Dickinson Dees and Newcastle firm Watson Burton, handling Northern's property work, could face losing a valuable local client if the bid goes through and new owners wished to re-tender the legal work.
However, the electricity experience of both firms to date puts them in a strong position for any tender.