Viridian shares jumped as much as 12 per cent in London yesterday after the North's main supplier of electricity said it had received a takeover approach.
The company, which operates the Huntsdown power station in north Dublin, declined to give any further details regarding the possible takeover, but it is believed the most likely bidder is either one of the Scottish energy groups or a private equity consortium, possibly from Asia.
Industry sources said it was unlikely that one of the larger European players would be interested in the Irish market because of its size. After rising as much as 12 per cent earlier in the day, the shares, which trade mainly in London, eased slightly, closing up almost 6 per cent, or 63.5 pence, at £11.49 (€17.)
Jack Gorman, an analyst at Davy in Dublin, said that any firm bid at these levels would be hard for management to resist.
Viridian, which has been the subject of takeover reports in recent times but has denied all speculation, recorded a 70 per cent rise in pretax profits, to £129 million, in its latest accounts for the year to the end of March.
Turnover was up 17 per cent to £976 million. About one-third of the total revenue came from the Republic.
Tadhg O'Donoghue, chairman of ESB, the main player in the Republic's electricity market, welcomed the possibility of a new entrant into the Irish market.
Mr O'Donoghue said that a larger company would be able to provide more competition than Viridian, which currently only serves corporate customers in the Republic. However, he said this was only the case if the potential bid had come from another energy company and not private equity players. "It should be good news generally for the market provided it's a serious energy player," he said, adding that it should also help increase generating capacity in the Irish market.
Sources in the sector said the prospective bid was likely to have come from a company with close proximity to Ireland. In this area, the Scottish players have a distinct advantage because they are already linked to Ireland through the interconnector. Scottish Power and Scottish and Southern declined to comment on what they described as market speculation.
Private equity groups meanwhile, have recently been very active in the UK utility market and in particular the water sector. One industry source said it wouldn't be surprising if they were now looking at Ireland. It is believed the stability of the regulatory environment in the electricity market in the North, and the reasonably healthy balance sheet of Viridian, would make the company an attractive target for such groups.
There would also be considerable scope for Viridian to be split in two parts should a private equity buyer so wish, with the monopoly business in the North, being spun off from the operations in the Republic, where there is considerable potential for growth in Viridian.
