Private Investor: The Murdochs have got me at their mercy

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Help! I'm a prisoner of the Murdochs. I'm being held against my will in two companies that are publicly quoted but which they now have a stranglehold over. I am at their mercy.

Indeed, every shareholder in BSkyB and, now, ITV is at their mercy. BSkyB was always a Murdoch family circus, with Rupert controlling the (effective) parent company, NewsCorp, and his son safely installed as chief executive. Oh, how I remember the fuss that was made at the time of his appointment and the likes of Norman St John-Stevas and other non-execs coming forward and reassuring us all that, though young, James was able and independent-minded.

Funny, then, how so much of the recent comment about BSkyB's purchase of 18 per cent or so of ITV has centred on his dad's motives rather than his. I think it's fair to say that there's still a certain amount of paternal influence there. Like the two Presidents Bush, the one's character and performance is often analysed by comparison with the other.

What will happen when Rupert slips away to the Great Boardroom in the Sky (no pun intended) will be fascinating to see. He's older than you think. I recall a couple of years ago that the BBC ran some obscene footage of him working out in a gym, for reasons I still can't fathom. Maybe they were hoping he'd peg out on tape, so securing a superb scoop - and well ahead of Sky, too. Just a thought.

Anyway, as I've often written, anyone who buys into BSkyB should be well aware that they have little control over what goes on in the company, because about 40 per cent of it is owned by News Corp, which in turn is controlled by the Murdoch family.

Now ITV investors are in the same boat. I bought at about 100p and when I first heard about the BSkyB stake, I was delighted, noting that it had paid 135p a share for it. All it meant was that it made it impossible for anyone else to bid for ITV, so then the shares slipped back. At around 115p, I'm still in the money, but there doesn't seem much point in hanging in there just waiting for something to happen.

So I've sold my ITV shares at 109.58p, taken the tiny profit and reinvested the proceeds in Rightmove, the online property website. It's a bit weak now because the brokers have all gone bearish on the housing market. They may be right, but Rightmove's strengths are still attractive. I've been making a point of getting into these internet stocks lately, such as Google and eBay, where they display extraordinary dominance in their sectors. So Rightmove it is, at 321p.

I was wrong about Vodafone. The shares might have perked up towards the end of last week when I added to my stake, but they've shown very little momentum since. The brightest spot in the portfolio is British Airways, which I see has been the subject of bid speculation. Yet another great national treasure about to be carried away by private equity?

Perhaps. According to reports, the £4bn bid for Qantas by Macquarie bank and Texas Pacific has put the idea of a BA deal in people's minds. So the shares are not far short of 500p, with one broker putting a "target" of 570p on them. A far cry from the post-9/11 depths of depression when you could pick them up for not much more than a quid. BA was worth buying then, just for the shareholders' discount you'd get on the price of a flight. I just wish I'd bought more, that's all.

Nothing, it seems, is too big for the private equity gangs to try to mug. It's all down to the chasm between the cost of capital and the return on equity (so I see from the analysis in last Wednesday's edition of The Independent).

The return on equity is running at an incredible 18 per cent and the cost of capital, even with interest rates nudging up, is way down at 7 per cent.

Thus shareholders such as I may be enjoying some good returns overall, but we're prey to seeing our best-performing assets bought up by groups who've borrowed cheap money to do so. Lots of it, too.

I've seen all sorts of stocks from Manchester United and Abbey to BAA ripped out of the portfolio in such moves, and it's getting increasingly difficult to find decent replacements. Just one more reason for the great British public to bypass equities and borrow some more to spend on houses, I guess.

s.ogrady@independent.co.uk

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