CITY WATCH

Predictably enough, with the Broadcasting Bill going before Parliament last week, media shares have had a sprightly time of it. But it was not only television stocks that saw some action – newspaper quotes were lively too.

First, the main action in television shares. As the Broadcasting Bill was prepared for Royal assent last week, attention continued to focus on where the best potential value lies in a world in which the limit on companies owning more than two UK terrestrial commercial television licences is replaced with a ceiling of 15 per cent of the total television audience.

HTV has long been punted as a likely takeover target. Early last week, its shares enjoyed another speculative boost of some l0p on a 330p mid-price. Stockbroker Panmure Gordon had named HTV in its most recent guide to perceived fair value, adding that the shares were 23 per cent off their recent high.

By Tuesday, it was the turn of Yorkshire-Tyne Tees Television to attract the aspirant arbitrageurs, with its shares jumping some 75p to 1238p. Granada is tipped as the most likely predator, with Carlton also in the frame. As a consequence, the quotes of Carlton and Granada began to slip slightly.

Among the potential prey, Scottish Television began to attract interest mid-week, rising 8p to 649p as attention moved away from HTV, where speculative positions had begun to settle down.

After House of Commons approval for the Broadcasting Bill on Tuesday night, Granada was hypothetically clear to bid for Yorkshire and the real world began to impinge on the excitement that has been holding up all values in the sector. By Wednesday’s close, Granada’s shares had fallen by 11p after Kleinwort Benson blew the whistle, claiming that, while Granada’s long-term prospects are sound, an acquisition of Yorkshire at current prices would be hard to justify. There needs to be a cooling-off period to return prices to pre-speculative rates. Meanwhile, Scottish and Yorkshire softened temporarily for similar reasons.

By Thursday, the wind was really taken out of Granada with news that a block of 5 million shares had been dealt at 816p, well below the prevailing market price of 838p. The overall situation in television stocks began to stabilise by the close of the week, but it is likely that we will face a period of further posturing and positioning before the real takeover action gets underway.

With Granada’s shares this week holding firm at around 836p and Yorkshire’s shares softening towards the end of the week at around 1233p, it would seem that those who would seek to conglomerate within this sector are waiting for some of the steam to come out of it.

As for newspaper publishers, Pearson had a little local difficulty with Goldman Sachs, which altered earnings estimates to allow for the sale of Westminster Press and redundancy costs, causing the shares to ease 2p to 662p. If the market had read Goldman’s report a little more closely, it would have noticed that this downgrade of earnings was part of a wider review which valued Pearson at some 720p per share.

Nevertheless, nervousness over the Westminster sale continued to depress Pearson during the week, pushing the shares below 645p. Clearly a buying opportunity for those who were paying attention.