COMMENT: Northern must not hide behind the rules

A more farcical end to a takeover battle is hard to recall but then the privatised regional electricity companies never did obey the normal rules of commerce. What usually happens in a takeover battle is that the hostile bid is tabled, the defence is mounted, the bid is raised to take account of the new information contained in the defence and the bidder, usually, emerges victorious. In the Alice in Wonderland world of privatised utilities, however, it works the other way round; bids go down, not up.

The Trafalgar bid for Northern Electric was tabled, the defence was mounted, the wrath of the regulator was incurred, and the bid has now been lowered. Not that this looking-glass way of doing things will make much difference to the outcome; the bidder will probably emerge victorious anyway, a change in the rules allowing.

Many shareholders in Northern are so heartily fed up with the regulatory shinanigans of the electricity sector that they would accept almost anything. It would be within Northern's rights to stop Trafalgar putting the lower bid. That certainly seemed to be its intention last night. Under Takeover Panel rules a bidder cannot lower its offer unless it is recommended by the target company. However, Northern is not going to win many plaudits by hiding behind the rules; if enough Northern shareholders demand it - and Trafalgar is not going to have too much difficulty persuading them - Northern will be forced to seek the necessary dispensation from the Takeover Panel.

In the circumstances it is the least Northern can do. It was Northern's land of milk and honey defence which goaded Professor Stephen Littlechild into action in the first place - the logic being that if Northern could afford to pay out £500m to its shareholders, then he had plainly been hoodwinked by the company when conducting his pricing review last summer. Both Trafalgar and Northern can only thank their lucky stars that the regulator acted before the bid closed. Had he waited, either Northern would have been saddled with a defence it could not afford or Trafalgar would have horribly overpaid. Shareholders should be allowed to decide for themselves whether the new price represents a fair value.

A balancing act for Sir Geoff

The gaze of the City will be fixed upon the figure of Sir Geoff Mulcahy on Tuesday when the Kingfisher chief executive unveils his Grand Design for the Woolies to B&Q group. It promises to be quite a moment.

Here is a man who has marched a retail conglomerate to the pinnacle of FT-SE achievement only to see it finish 1994 as the worst-performing share. The company's much-touted slogan of Every Day Low Prices now refers as much to the Kingfisher share price as the goods it sells in its shops.

So far Sir Geoff, who was always Kingfisher's driving force, has allowed others to take the blame. Since the group announced a profits warning, four executive directors have been booted out. Sir Geoff has been demoted from chairman to chief executive and stripped of his long-term incentive bonus - but has managed to keep his job while all around him were losing theirs.

He is giving himself a second chance, attempting to repeat what he achieved once and then allowed to go to seed. Sir David Scholey is going through the same process at SG Warburg; both must be painfully aware that few management comebacks ever prove successful.

Sir Geoff faces a difficult balancing act. The new strategy must appease disgruntled shareholders who have seen the value of their investment almost halve in a year but avoid setting targets that are too specific lest Sir Geoff finds himself hoist by his own petard.

Most expect an axe to be taken to Comet, the loss-making electrical business, with up to 50 stores being closed. Management has been changed at Superdrug and Woolworths, where better buying and improved IT systems should start to yield results. In DIY, Jim Hodkinson has been touring the City saying that B&Q is set to become the driving force of the group once more. Still, if Sir Geoff fails to convince he doesn't have to worry too much.

In the well remunerated world of Kingfisher, every cloud has a silver lining. In the light of this week's announcement that the four sacked directors will receive compensation of up to £3m between them, what price a £1.3m chief executive?

A hollow laugh for Sir Iain

Only someone thick-skinned enough to compare his job to a junior doctor's could blast off yesterday about the regulators with quite the insensitivity of Sir Iain Vallance.

On top of his well rehearsed critique of the regulators for being too powerful and unaccountable - "legislator, prosecutor, judge, jury and executioner" - the BT chairman complains that they should be more open about how they reach their conclusions, and why.

But where transparency is concerned, this is a case of pots and kettles. Don Cruickshank, Sir Iain's very own regulator at Oftel, has encountered Kremlin-like obscurity at BT. As he spelled out in a recent speech, he was at one stage driven towards considering new rules about consultation procedures to overcome BT's reluctance to go public.

Believe it or not, BT had simply failed to respond formally to the latest public consultations on accounting separation, which have the objective of making BT's accounts more open. Instead, BT asked to give informal confidential submissions.

The result, Mr Cruickshank complained, has been "a lack of transparency, a lack of understanding by the rest of the industry of what BT's position is, and frankly the suspicion of an Oftel-BT deal in a closed room. This concerns me very greatly. The rest of the industry has had no real opportunity to respond directly to BT's arguments."

New procedures to ensure that the consultation process is open and visible could involve a right to overrule a plea for confidentiality unless a test of "material commercial harm" is met, Oftel said.

Regulators have many faults, and there is little doubt that the system is due for an overhaul after the electricity fiasco. Too much power is vested in one person and there needs, as Sir Iain says, to be a widening of responsibility at the top, perhaps through the use of a panel of regulators rather than a single person.

But Sir Iain protests too much. There will be hollow laughs in the rest of the telecommunications industry at his claim that the regulator should be as accountable to "customers, shareholders, government and society at large as the regulated companies are required to be."