collapse starts to hurt the Old Economy

Upping the Tempus
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Nothing better illustrated the brash self-confidence of the generation than the San Francisco rooftop parties once hosted by The Industry Standard, the bible of the New Economy. The queues stretched around the block and getting an invite was like being on the A-list for Elizabeth Murdoch's match with Matthew Freud.

By the same token, there could be no better epitaph for the era than yesterday's announcement that the Industry Standard is to cease publication this coming Monday. In its heyday, it was 350 pages fat and boasted a circulation nudging 200,000. But as the bubble burst so did the magazine's readership and its girth. It shrunk in size by a quarter as advertising evaporated and along with it revenues. From next week there will only be a skeleton staff left to keep the website running.

The 150 redundancies, sad as they may be, are just part of the legacy. The fallout is being felt in many other ways. Investment banks which brought internet stocks to market are being sued by shareholders who lost their shirts.

And now there is every sign that the meltdown in technology stocks which triggered the US slowdown is reaching into the heart of the old economy. The 5,000 job losses announced yesterday by Ford are almost certainly a harbinger of things to come. So far the impact of the downturn, in employment terms, has been felt largely in the telecoms, technology, media and electronics sectors. But as the job losses mount, more and more people are left with less and less to spend on motorcars and all the other products of the traditional manufacturing sector.

The latest estimate, based on publicly announced lay-offs of 1,000 or more, suggests that 300,000 jobs have been lost in the last three months. That does not include smaller redundancy programmes and those jobs which disappear through natural wastage. The economies of Europe and the US are almost certainly growing too slowly to replace all those lost jobs.

That in turn suggests we are about to suffer a slowdown in consumer spending – the engine which has so far kept the US and UK economies out of recession. Here at least, the jobs market remains buoyant and consumer confidence is high. But the rate-setters need to be ready to adjust policy at the first sign of any faltering.



TBI'S DEFENCE against Vinci's hostile £516m bid has not got off to the best of starts. Keith Brooks, chief executive of the Luton airport operator, found himself on the back foot for the second time yesterday and the offer document has not even been sent out yet.

First TBI got itself into a tangle with the Financial Services Authority for permitting its non-executives to deal in the shares just a fortnight after the French had made their first runway approach. Now, it has been forced by the Takeover Panel to retract Mr Brooks' calculations about how TBI is worth much more than Vinci is offering to pay.

He claimed, in this newspaper and elsewhere, that TBI's true value was nearer £800m – some 60 per cent more than Vinci has bid. The French promptly invited Mr Brooks to substantiate the figures whereupon the board was forced to admit that "no reliance" could be placed on the numbers attributed to its chief executive.

Since valuation will be at the core of this takeover battle, that amounts to a pretty humiliating own goal for the TBI team. For the record, Mr Brooks' figures were based on the price paid in the auction for Bristol airport. On that basis, he reckoned TBI's Belfast and Cardiff airports were worth £500m while Luton alone could fetch £300m – three times the amount TBI paid when it gained control of Luton from Barclays earlier this year.

Not for the first time, the comparisons flatter to deceive. TBI itself pulled out of the bidding for Bristol on the grounds that it could not possibly be worth the £234m eventually paid. The calculation also fails to take into account the big hole that will be left in Belfast's profits when BMI British Midland pulls out this October. Finally, TBI is not a pure UK airports operator. It also owns a hotel and some pretty indifferent overseas airports. The mysterious expressions of interest that TBI began to receive as soon as the bid had landed may produce a rival offer. There again, they may prove nothing more than casual inquiries or bids for bits of the group.

Still, it is early days and the market certainly thinks the French can afford to pay a little more than the 90p on the table. If the bid runs its full course then it will not be decided until the end of October. Sometimes, however, bid defences are doomed from the start. This looks like it might be one of those occasions.



THE PHONEY war is finally over and come Monday Sir Martin Sorrell should launch his bid for Tempus Group, the media buying firm which is already on the receiving end of a £425m offer from France's Havas Advertising. Being the cunning old fox that he is, the boss of WPP is letting the French sweat it out over the weekend while he decides how much clear water to put between the 541p already on the table and WPP's counter bid.

Alain de Phouzilac, chairman and chief executive of Havas, must be wondering just how much higher he will need to go or how badly he really wants Tempus. For the French and Chris Ingram, the Tempus founder and chairman, there is no easy answer. In the fast consolidating global advertising industry, size and scale are necessary for survival. The French badly need to combine MPG, their media buying arm, with the core CIA business owned by Tempus.

However, WPP is extremely well positioned. Having built up a 22 per cent stake in Tempus over several years at an average price of 200p per share, he is in a truly win-win position. Should his anticipated cash offer of around 555p per share succeed, he will still have paid less for Tempus than Havas is offering. Should it be trumped, by Havas, he can retire from the fray with a £60m pound profit and consider other targets. Perhaps Aegis.

Mr Ingram, largely for reasons of pride, desperately wants to escape Sir Martin's clutches but a number of the 38 Tempus executives who backed the Havas offer are either neutral or sympathetic to Sir Martin's approach and his promise of top jobs in an enlarged buying operation. It seems this is one battle where cash is truly king and the prize will go to the most committed shopper.