1,600 Swalec staff to share pounds 35m in takeover bonanza pounds 35m b onanza

More than 1,600 staff at Swalec, the South Wales electricity distributor, will make a pounds 21,000-a-head profit in a pounds 35m bonanza on share options in the wake of yesterday's agreed pounds 872m takeover by Welsh Water. But 900 jobs are likely to go.

Andrew Walker, chief executive of Swalec, will quit with a payout expected to be around pounds 700,000, in pay and options.

The agreed takeover deal, which will form Britain's second joint water and electricity utility, brings a pounds 35m bonanza to members of Swalec's Sharesave scheme.

Options become automatically exercisable after a takeover, though Welsh Water is expected to tell staff they can avoid a substantial tax liability by agreeing to transfer the Sharesave scheme to the new group. However, staff were yesterday far from overjoyed because the share options profits come as more job losses loom.

Before leaving London for Cardiff to brief staff, Mr Walker said they were "very despondent" at the news of the takeover, which came after Swalec's board fiercely rejected an informal offer of 916p a share last Thursday.

The company is expected to lose about 900 jobs in total from the 5,000 in the core water and electricity businesses, excluding offshoots such as contracting.

Of these, 600 are already planned to go from Swalec and Welsh Water under existing management plans, drawn up to cut costs before the takeover talks.

The merger itself is expected to lead to the loss of about 300 additional jobs, as a joint services company is set up, employing about 700 staff. Welsh Water said that about 40 per cent of the controllable costs of the two regulated businesses overlapped. It is also thought the two corporate headquarters in Cardiff are to be merged.

Rhodri Morgan, Labour environment spokesman in Wales, demanded a Monopolies Commission reference because Welsh Water is permanently protected from takeover by a 15 per cent limit on individual shareholdings. He said there were questions over a bid-proof company taking over an unprotected one. Iain Evans, Welsh Water's chairman, said there would be no rebate for customers, but he promised that as cost savings came through the group would look at how to give them some of the benefit in price or extra investment.

The change of heart at Swalec came after Welsh came back with another offer on Sunday morning of 940p a share - worth 965p to pension funds because of a tax rebate - with a cash alternative of 930p.

The offer is made after excluding the value of Welsh Water's National Grid shares, which are about to be handed back to shareholders and are worth 194p each to Swalec shareholders. Swalec shares closed at 925p, excluding the Grid.

Swalec shook hands on the deal at 9pm on Sunday and the formalities were completed at 2.30am yesterday morning. Mr Walker said the offer met his demand for a price "well north" of 900p to secure agreement.

He said he had been asked to leave by Welsh Water because there was no room for two chief executives.