View from City Road: Takeover time looms for utilities

Apres Stephen Littlechild, le deluge. Investment bankers and analysts are gearing up for the merger binge of the year. Not since last year's wave of takeover activity in the television sector has there been such an opportunity to make hay.

Next March, the golden share that prevents bids for regional electricity companies will cease to exist. Professor Littlechild's cavalier review of charges has removed one of the last obstacles. With profit and dividend prospects set fair, the RECs look highly attractive takeover propositions.

Those that don't engage in defensive cost-cutting mergers among themselves will be gobbled up. The opportunity to buy into cash-generative monopolies such as the RECs comes once in a blue moon. Accomplished cost-cutters such as Hanson are looking long and hard, with the only real concern now the possibility that Labour will get in and take it all away from them again.

Water companies also lose their golden share status shortly; a similar splurge can be expected there. Already the more adventurous fund managers are building big positions in expectation of the fun. Who's going to bid for whom looks like becoming the market guessing game of the moment.