PacifiCorp is throwing in the towel in its pursuit of Britain’sThe Energy Group (TEG) with the announcement it will not increaseits revised offer for the company. Energy Group Thursday recommended shareholders accept the 4.45 billion pounds ($7.4billion), 840 pence/share, cash offer made by Texas Utilities forthe company. “The Texas Utilities Offer represents excellent valuefor our shareholders and we recommend that they accept,” said DerekBonham, Energy Group chairman.

“PacifiCorp’s 820 pence per share offer for TEG represents afull price, including the value of synergies to be obtained fromTEG’s U.S. coal business,” said Fred Buckman, PacifiCorp CEO. “Wedo not see acceptable financial returns available for PacifiCorpshareholders at prices in excess of 820 pence per share.”

Texas Utilities noted PacifiCorp’s withdrawal from the battlefor Energy Group. “The addition of The Energy Group is a key stepin implementing Texas Utilities’ multi-regional strategy,” saidErle Nye, Texas Utilities CEO. “The acquisition is expected to beearnings and cash flow enhancing in the first complete yearfollowing completion of the acquisition and provides TexasUtilities with a significant and integrated presence in three keyliberalizing energy markets – the United States, the United Kingdomand Australia.” The last day on which the Texas Utilities offer maybe declared unconditional is now May 19.

PacifiCorp will record an $86 million pre-tax charge to firstquarter 1998 earnings for bank commitment and facility fees, legalexpenses and other related costs, incurred since its original bidfor TEG in June 1997. These had been deferred pending the outcomeof the transaction. PacifiCorp said itexpects to record, in thesecond quarter, a potential gain on the sale of 46 million TEGshares currently held. “The costs associated with pursuing theacquisition of TEG, while significant, are dwarfed by the addedshareholder value that we fully anticipated at our announced bidlevels.”

The decision to end its pursuit of TEG does not changePacifiCorp’s strategic direction, Buckman said. “We willaggressively look for opportunities to expand on our core strengthsin fuels management, power generation and distribution, and energymarketing and trading. We will use our balance sheet strength toinvest prudently in new opportunities at attractive return levelsor to return capital to our investors as appropriate throughpotential share repurchase activity.”

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