City talk: Clear run for BA as alliance takes off

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The Independent Online
THE ALLIANCE between British Airways and American Airlines seems ever more likely to proceed, with less penalties than anyone had expected, given recent leaks and hints from Brussels that the deal will gain the green light in only modified form on 8 July. On that premise, the shares represent decent value for the longer term. Meanwhile, as if to vindicate its long-term approach to forging closer partnerships with other operators, it has just appointed John Patterson as director of alliances. He will be responsible for the development of alliance strategy, relationships with partners and co-ordinating alliance implementation.

Shares in BGR, the old Bank Group Restaurants business with a wholesale meat, poultry and fish supply business to the trade, fell sharply last week. At 244p, they are down from 265p. That may be a result of the scare in the sector, sparked by a profits warning from Regent Inns. But holders have grounds for optimism. It is believed the business is cooking up a deal for an acquisition to add to its wholesale business, which accounts for two-thirds of its sales. This division aims at upmarket clients, and has been able to squeeze out juicy margins as a result. Currently trading on a prospective rating of 25 times current year earnings, the shares are not cheap, but could be chased higher.

Plenty has been made of the Government's attempt to prepare a framework for the UK's energy industry. Response has ranged from the disappointed to the welcoming. For RJB Mining, by far the UK's largest coal operator, the outlook is seen as bleak. The shares responded accordingly, dropping 5p to 135p on the day, and another 14p on Friday to 121p. Yet RJB has a small window of opportunity where it can take pre-emptive action to forestall the worst of the outcome. On a long-term view, the UK coal industry still offers potential. Who knows? Perhaps the company might be able to drum up a foreign partner willing to take on some of the risk associated with operating in this unforgiving environment. That is what the directors of RJB should be attempting at this moment to protect shareholders from the most severe outcome.

More news of the difficulties faced by companies trying to brief City analysts, this time ICI. Analysts who spoke on the phone to the company recently downgraded profits, by between 6 and 9 per cent to pounds 500m for the full year. Tut tut, says the London Stock Exchange. Especially for companies whose shares are also listed in America, where the SEC exerts far greater regulatory control. No, companies must never brief analysts if the information is likely to be material, as it provides an unfair advantage over other investors, especially small shareholders.

This is true. However, one way for information to filter into the market is by the company taking the time to brief analysts informally, in between the formal briefings. To cut back briefings would be foolish. Perhaps some compromise is needed, where a transcript of briefings can be released a few hours after they have taken place. With the electronic information systems available today, it shouldn't be impossible.

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