Business View: Stock Exchange bidders must show their AIM is true

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Another bad week for Deutsche Börse. But when is it anything other? The London Stock Exchange's customers, the City regulator and the Börse's shareholders were all rounding on it. But then it has been the only game in town, so it's there to be shot at.

Another bad week for Deutsche Börse. But when is it anything other? The London Stock Exchange's customers, the City regulator and the Börse's shareholders were all rounding on it. But then it has been the only game in town, so it's there to be shot at.

That should change this week when Euronext unveils what it is up to. The Franco-Dutch group is not about to put its money where its mouth is. That would start a bidding war, which is what Clara Furse at the LSE wants but has been unable to engineer.

But while Euronext may have the advantage in bid structure, clearing and settlement, shareholder support and regulatory comfort, it falls down just as badly as the Deutsche Börse on small companies. In fact, it could be even worse.

AIM, the LSE's junior market, has been a roaring success, allowing scores of companies to float when a full listing was too difficult and expensive. But nothing like it exists on the Continent. The Börse's attempt - the NeurMarkt - was successful during the dot-com boom, bringing all sorts of uncooked companies to investor attention before a massive collapse brought billions of euros in losses. In France, Holland and Belgium, Euronext and its constituents have never even tried to create a secondary market for entrepreneurial companies to raise risk capital.

However, despite AIM's success, it does not make much money for the LSE. So a successful bidder, having to fund the inflated price paid for the LSE while under pressure to keep prices down, might not be so supportive of AIM.

This would make a lot of people in the City angry. There is already talk of setting up a rival to AIM. The bidders need to give some reassurance about the future of the market. It is another hurdle in what could be a long battle for the LSE.

Prime-time shares

The City has its regular whims and fancies - the largest in recent years being its telecoms, media and technology obsession from 1997 to 2000, and the latest being TV production. But before investors pile into Shed Productions, maker of Footballers' Wives, and RDF Media, of Wife Swap fame, they might consider whether firms like these sit comfortably on the public markets.

Both companies are floating on the back of hit shows, though RDF's reality TV formula appears to have more legs than Shed's heady mix of celebrity and fantasy. And the problem with hits is that it is difficult to follow them up (as anyone who has watched the Friends spin-off Joey will testify). So it is hard to know how to predict forward earnings.

Add to this the fact that media regulator Ofcom is taking a dim view of broadcasters owning all the rights to shows made by independent producers. In the past, Channel 4 would pay, say, 105 per cent of the budget to a producer and then be able to make money from overseas sales and the like. Now the broadcaster will pay about 70 per cent of the cost, but only have the first showing. The producer then gets the rest of the revenues.

This is great for a hit such as Footballers' Wives, not so good for a documentary about poverty in Guatemala. It is also good for larger producers such as RDF, which have a sales infrastructure - not so good for "the two people in an office in Soho" producers.

It also presages a consolidation in the industry, which no doubt Shed and RDF will want to exploit using the currency from their floats.

All of which suggests that, unless these floats are priced to go, it may be best to stay cool in this hot sector.

The rich man's table

My invite to Gordon Brown's G7 dinner at Lancaster House last night must have been lost in the post. But while the likes of Lord Browne, Sir Digby Jones and Rod Eddington tuck into their Loch Salmon and Southdown Lamb, they might wonder about the richness of the refreshments.

Champagne Pol Roger Rich, at £25 a bottle, is followed by white wine Corton-Charlemagne 1990 (£51 a bottle), red wine Château Cheval Blanc 1981 (£80) and a port, Quinta Do Noval 1966 (a bargain at £85 a bottle, given that the 1970 goes for £650). I hope they raise a toast to those millions who do not have access to clean drinking water.

j.nisse@independent.co.uk

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