'Cheap' Contact shares likely Edison target

By Geoff Senescall

Edison Mission Energy is tipped to shortly signal its intention to add to its Contact Energy shareholding.

The head of equities for AMP, Stephen Walker, says Edison has made little secret of the fact that it thinks Contact shares are cheap and that it would like to buy more.

Edison, which holds 40 per cent of Contact, is entitled to give notice - if it wishes - at the end of this week if it wants to increase its shareholding.

Under a standstill agreement signed when it bought its holding from the Government, Edison cannot buy shares until November 11.

As a major shareholder, it has to give 15 business days' notice of any intention to change its Contact shareholding.

Mr Walker believed that Edison would likely file that notice sooner rather than later to give it the flexibility to make a purchase, but that it might not follow through right away.

Brokers contacted yesterday thought Edison would at least want to lift its holding to 51 per cent.

With Contact closing at 335c, any purchase would be at a significant discount to the 500c Edison paid for its initial stake.

When it comes to valuing Contact, brokers are mixed - ranging between 270c and 360c a share.