A fight to the death in theatre of the absurd

The battle for Southern Water looks like developing into theatre of the absurd. Pointless and wasteful though fight-to-the-death duals invariably prove, neither Scottish Power or Southern Electric is likely to back off. The prices being bid stretch credulity. As the stakes rise, there is every prospect of the winner seriously overpaying.

From this side of the fence at least, both offers look equally questionable. Scottish Power's bid is little more than a glorious piece of management empire-building south of the border, a noble enough cause no doubt, but of no ultimate value to anyone.

And Southern Electric's bid looks defensive, half-hearted and a little bit desperate. It probably wouldn't be bidding at all but for the threatened Scottish encroachment on its territory. Certainly its claim that "the business sense of the deal sticks out like a sore thumb" is curious. If that were the case why did Southern consider merging with Midlands Electricity, then dally with South Western Electricity, and finally get to the stage of reading the banns with National Power only for Ian Lang to put his oar in. It now emerges that all these alternatives were no more than flirtatious preparations for the "real thing", that attractive young lass from next door, Southern Water.

Whatever Southern's management now thinks, its own shareholders are feeling just a little bit uncomfortable. Overnight Southern's position has been transformed from bid target to bidder. Not many months ago, investors were being offered pounds 9.60 a share by National Power. Yesterday its bankers were underwriting a bid for Southern Water at 655p a share. A few sore thumbs there.

With 10 per cent of the stock now firmly in the Southern Electric camp, Scottish plainly has a bit of a hill to climb. Would it not be better to beat a statesman-like retreat now and bid for somebody else? After all, there are plenty of other English water companies, lots more fish in the pond. Here are two reasons why Scottish is unlikely to be following this course - not unless there is a sudden rush of common sense to the head, anyway. One is that much time and effort has already been invested in bidding for Southern Water. It would be just too exhausting to start all over again. Another is that even if it did, Scottish could easily find itself in exactly the same position, with the water company of choice receiving a defensive bid from the local electricity company. So fight to the death it is. Southern Water's shareholders must be finding it hard to believe their luck. What fun.