Comment: Rich rewards on the high wire for Mr Green

`MAI is not the impossible target for Carlton that Lord Hollick would have us believe. After the takeover it would still be beneath the viewing ceiling set by the new Broadcasting Bill'
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For Michael Green, a hostile assault on either MAI or United News and Media is a first fraught with risks - risk of overpaying, risk of losing, regulatory risk and risk of damage to reputation. Never before has Mr Green embarked on a contested takeover; he's not the sort of chap to like the profile it gives. Bids of this sort can be hurtful and if ultimately unsuccessful, highly damaging. Whatever he does, his action will disrupt plans for a cosy MAI/United merger; both can be expected to fight like alley cats.

Yet he appears intent on doing it. Certainly the City, which remains to be convinced of the merits of the United/MAI tie up, would like him to. This is an industry where everyone is a little touched by madness right now - sky high valuations, the lure of the multimedia revolution, the fear of missed opportunity. "Do a deal, do a deal", fee hungry investment bankers are whispering to their clients,"or you'll be left behind and there will be none left to do".

That said, MAI is not the impossible target for Carlton that Lord Hollick would have us believe. After the takeover, Carlton would still be beneath the viewing ceiling set by the new Broadcasting Bill. Its share of the ITV advertising market at approaching 40 per cent is a tougher regulatory hurdle to jump but again not impossible. It could be done, for instance, by ring fencing the MAI sales operation. Alternatively, Carlton could take its chances before the MMC and argue that with Channel 5, satellite and digital all eating into the advertising cake, such measures will be meaningless in a few years time.

High wire stuff for Mr Green, but should he make it to the other side just think of the rewards.

New rules on interest rates

Making it up as you go along has always been a peculiarly British talent so it is perhaps no surprise that the Chancellor casually rewrote the framework for setting monetary policy during his January chat with Eddie George. The minutes to this meeting, published yesterday, were not only the first not to mention the two-year inflation target at all, but they also set out new rules for changing interest rates. These are:

1 look at all the data available at the time of the meeting;

2 change interest rates in a timely fashion;

3 weigh up the risks of action and of inaction.

While the first rule is no surprise, the second and third ought to raise a few eyebrows for the implication is that interest rates should be chopped and changed according to immediate needs. What happened to the rule about changing interest rates with regard to the medium-term outlook for inflation? Mr Clarke dismissed the indicator - broad money growth - that might be signalling inflationary danger in the medium term, saying it could probably be explained by one-off factors. There must be a suspicion that the Chancellor's thoughts will be will be governed more by the risks of losing the election than the risks of higher inflation beyond May 1997. Equally perturbing is the fact that the Governor apparently raised no objections to the new framework. The only hint of Bank uneasiness was the watery comment that financial markets might misinterpret ``timely'' reductions given their current expectation that there is only a little scope for further rate cuts.

The three year old monetary arrangements have, despite all their other merits, fallen into the obvious trap. That is the temptation to set interest rates in reaction to month-to-month changes in the economic statistics.Inflationary conditions are so benign at the moment that this seat-of-the-pants approach does not hold any immediate danger. However, the point of the monetary arrangements was to set a framework that would enforce discipline about interest rate policy in all sorts of conditions. There is a danger of this going by the board.

Glittering prize in Lloyds battle

After weeks of somnolence, the battle for Lloyds Chemists suddenly sparked into life yesterday. As has been evident all the way through this bid, the stakes are high for both bidders. Lloyds represents the last remaining big chain of chemists anywhere near to rivalling Boots. The winner would build on an existing one third control of the drug wholesale market, while overtaking Boots as Britain's biggest chemists chain.

While the prize is glittering, the defensive arguments are equally strong. The loser would face a new force in drugs wholesaling and distribution which could prove invincible, while growth would be further limited by the lack of big acquisition opportunities. So despite Gehe's enhanced bid, UniChem is not giving up. Paying up to 497p a share, it topped up its stake to 10 per cent yesterday - a total investment of pounds 60m. If competition concerns do get the upper hand and the OFT calls a halt to the bid battle it would find itself out of pocket.

Furthermore, victory at this level could prove Pyrrhic if it left Unichem so financially weakened that it could not expand from its newly enlarged platform. Gearing of 185 per cent leaves very little room for manoeuvre. The noble course might be to leave Gehe, facing huge levels of debt itself, to its prey.

No substitute for honest public finance

Howard Davies makes an unlikely disciple of Michael Milken, the junk bond king, but was that not the deputy governor of the Bank of England preaching the faith yesterday? Indeed it was. Mr Davies bemoaned the absence of a market in high yield bonds, which he thought would be particularly appropriate as a way for high-technology based companies to raise finance - and might also be a way of funding capital projects under the government's Private Finance Initiative.

The unlikely source of the idea does not discredit it. After all, it's not as if the City is doing a brilliant job serving the capital needs of smaller companies.

As for the problems of the PFI, they are legion. As the deputy governor pointedly remarked, the Government's often-repeated belief that privately- financed schemes would replace more conventionally funded public investment has proved "over-optimistic".

Mr Davies's proposal is designed to help by allowing finance to be raised on the basis of the project -rather than through consortia, which have an uncomfortable habit of falling apart. But a better solution to the PFI conundrum would be to revert to honest public finance.

There is no valid reason why the public sector can't combine its huge advantage in cheap borrowing with new methods designed to avoid overruns and to extract greater efficiencies from private sector contractors.

Rather than PFI project junk bonds, the cheaper solution would be to junk the jinxed Private Finance Initative altogether.

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