Deadline looms for Edison

By CHRIS DANIELS

The battle for Contact Energy is expected to resume next week as US energy giant Edison Mission tries to buy all of the company.

Edison is offering $4.14 a share for the 49 per cent of Contact Energy it does not already own, but is running out of time to snare the remaining shares.

Its offer expires on February 3 and cannot legally be extended.

If Edison does not get enough acceptances to reach a 90 per cent stake in the company, the offer fails.

Contact's share price has fallen in the past few weeks from $4.08 to $3.90.

Forsyth Barr Frater Williams executive director Don Turkington said he had not heard from Contact about how the takeover offer was going, or whether it was likely to succeed.

He said the low share price indicated a belief that Edison's offer would fail.

Part of that share price fall may be due to the recent news of good water flows into South Island hydro lakes, stabilising the price of electricity on the wholesale power market.

Contact, with its emphasis on thermal generation, makes good profits in dry, cold years - like last year - when water is scarce.

"Some people who are holding out in the expectation that Contact will be making good profits out of this - well, that may be a bit of a forlorn hope," Dr Turkington said.

It is thought that institutional investors holding out for a better price will leave Edison short of the 90 per cent stake it needs for compulsory acquisition of all Contact shares.

Dr Turkington said the recent decline in Contact's share price might make the Edison offer look more attractive to these institutions.

Many of the 121,000 small shareholders had already accepted the offer, Dr Turkington said.

Their acceptances had been sitting around for a long time, waiting for the deadline to expire.

A consultant at Sue Wood and Associates, a public relations agency promoting the takeover offer, said yesterday that the Edison senior vice-president fronting the campaign, was on holiday.