British Energy shareholder pushes for Centrica merger

Louise Armitstead and Mark Kleinman
Last Updated: 9:26pm BST 23/08/2008

The biggest institutional shareholder in British Energy is demanding a merger between the nuclear power generator and Centrica, the owner of British Gas, as the "obvious solution" to the future of both companies.
Invesco, which owns a 15 per cent stake in British Energy, worth about £1.5bn, as well as 5 per cent of Centrica, has presented to both companies' boards its views on the deal, which include a place for EDF, the utility giant majority-owned by the French government.
Speaking publicly about the proposed deal for the first time, Neil Woodford, the head of investment at Invesco, said: "A combination of British Energy and Centrica solves the problems facing both companies today. Together they can work out a joint venture with EDF to build nuclear sites."

Woodford will meet Government representatives on Tuesday, when he will lay out his plans to the Shareholder Executive, the body which manages the sale of Government assets.
British Energy's second biggest institutional shareholder, M&G, is backing the pressure for a merger between the companies, say insiders.
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Earlier this month, Centrica revived the prospect of a £22.5bn all-share merger with British Energy, first mooted at the beginning of the year. This plan was given a lukewarm reception by ministers because the Government, which owns 35.5 per cent of British Energy, prefers the idea of a cash offer for its stake as the Treasury seeks much-needed funds. Centrica has since indicated that it would be prepared to pay cash for the Government's stake in British Energy.
Woodford, who also manages stakes in Drax and Scottish & Southern Energy, said: "In its handling of this sale, the Government has subordinated the value consideration to matters of policy and cash."
Invesco and M&G, which together own 22 per cent of British Energy, thwarted EDF's plans to buy it by rejecting the French firm's bid at the last minute. The bid, which was favoured by the Government, was at 765p per share. Although neither has said what level would be acceptable, sources say it could be over 900p a share.
Woodford denied he would block a deal at any price. He said: "Of course we would be sellers of British Energy at the right price, but our analysis of the company shows that this is significantly higher than the 765p a share EDF offered.
"British Energy is long capacity and short customers while Centrica is the other way round so they would make a great combination."