Christmas lure dangled before Contact owners

By CHRIS DANIELS

The lure of some extra Christmas spending money will soon form part of Edison Mission's strategy to gain control of Contact Energy.

The US energy giant has just under four weeks to persuade the thousands of small shareholders and institutional investors to take up its offer.

Contact's 125,000 shareholders, most only holding around 800 shares each, will be told that if they agree to sell, they will get $4.25 a share - made up of $4.14 from Edison and an 11c a share dividend.

The independent Contact directors have recommended shareholders sell, but many investment professionals disagree.

Edison will spend the next few weeks trying, through advertising, mailouts and meetings, to turn the tide of opinion towards that of the directors.

Recent declines in world share prices may help them convince nervous investors that now is a good time to take the money offered and put it somewhere safer.

Analyst Peter Sigley, of sharebrokers JBWere, said the decline in share price was a clear sign that the market expected Edison's takeover bid to fail.

Edison executives have spent the week "doing the rounds" of institutional investors, trying to convince them that the latest offer of $4.14 was full and final, with no prospect of a further sweetening.

The institutions would tell Edison, said Mr Sigley, that they would not sell and did not expect the share price to dramatically drop in value once the takeover failed.

Such a failure, said Mr Sigley would come from a combination of thousands of small shareholders not receiving the mailout, others forgetting to reply to the mailout or deciding to sit back and wait, coupled with some of the institutions deciding the offer price was too low.

Edison's Asia Pacific senior vice-president, Bob Driscoll, said his advisers did not believe the drop in share price over the past week could be taken as a sign that investors were "hedging their bets" in anticipation of a failure.

"The message I've been giving to everyone who'll talk to me is it's firm, fair, final and full."

He said the offer had been structured with a condition of getting 90 per cent because there was very little value for Edison in getting anything less.

Mr Driscoll said he believed the share price dropped during the week because brokers and analysts had predicted Edison would offer more than $4.25 when it raised its offer from the original $3.85.

Mike Brooker, a mergers and acquisitions specialist at law firm Phillips Fox, said there was nothing in the Takeovers Code stopping Edison Mission from launching another takeover bid straight away, if its offer failed.

The only variation Edison Mission can make to the takeover offer is an increase in the price it wants to pay for each share.

Contact shares yesterday closed up 4c, or nearly 1 per cent, at $4.10.