Michael Harrison: The picture is beginning to look prettier, but Sky's pilot still has plenty to prove

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The Independent Online

Since the BSkyB board is also chaired by his father, this oath of allegiance has limited relevance. News Corp is taking creeping control of BSkyB and if it does not participate in the next share buy-back programme its stake will rise to just short of 40 per cent. As chairman of both companies, Rupert Murdoch could just as easily decide that the interests of BSkyB were best served by allowing his son to take the reins at News Corp.

But perhaps not for a while yet because James has plenty to prove at BSkyB. The share price is still below where it was when Mr Murdoch arrived and proceeded to drop his little bombshell on investors that the business had been run too hard for profit and too little for long-term subscriber growth.

Twelve months on, the strategy is being vindicated. Customer numbers are 432,000 higher, spearheaded by a doubling in the number of households switching to Sky+, and the target of 8 million subscribers by Christmas looks well within reach. Although Mr Murdoch promised shareholders a diet of bread and water while he pumped millions more into marketing, profits are up by nearly a half as well.

But the competition from a state-funded BBC does not get any less and quite soon Mr Murdoch is likely to have to contend with a more powerful cable TV rival too in the shape of a merged Telewest/NTL.

The question no can really answer is at what point BSkyB runs out of growth. The roaring success of BBC's Freeview proves there is a sizeable market for those who want digital television but are not prepared to pay a monthly subscription for it or have a dish screwed to the wall. Sky has its own version, freesat, which it has been rolling out quietly on a regional basis since last autumn, but how serious it is about the product is unclear. It was originally conceived as a foil to Freeview in the hope that subscribers who signed up would migrate over time to a paid-for package of television.

Even if the pay-TV market matures more quickly than anticipated, there are still other ways of squeezing the lemon. There are now 645,000 households in the country where Sky can beam its programmes into more than one room. Video-on-demand will arrive next year at a cost of about £200 a set-top box and then there is SkyBet, Mr Murdoch's version of online gambling, which is going gangbusters and will soon overtake advertising as the group's second biggest revenue earner. The rumoured cable merger could also prove as much of an opportunity as a threat if it allows Sky to get its hands on Flextech, the Telewest content provider which owns the UK Gold brand.

Mr Murdoch's hardest task will be to convince outside shareholders that the company deserves a re-rating after the shock he delivered a year ago. If he can do that, he may just have earned his spurs for the bigger job that lies waiting ahead.

Saint-Gobain faces a plastering

If you thought hostile takeovers had gone out with the ark in this new age of agreed bids where private equity is king, then think again. In fact, think plasterboard. It is not the kind of material to make the heart race, but Saint-Gobain of France has got excited enough about the stuff to bid for BPB, the world's biggest producer, over the heads of its directors.

The French glass maker fired off a sighting shot worth 675p three weeks ago. BPB declined to talk. Yesterday, after an improved price of 720p was again rebuffed, Saint-Gobain decided to put its offer direct to shareholders.

BPB regards the bid as unwelcome but Saint-Gobain says it doubts very much whether shareholders will take the same view. With the shares well above the offer price, it might have to revise that opinion smartish. There is no obvious white knight for BPB. But its nine biggest shareholders own 45 per cent of the company and two of them have already emerged from the plasterwork to reject the French bid.

Since this offer is straight cash, it is not a question of shareholders being asked to back one management against another. It is simply about price and the market believes the French can afford to pay more.

The plasterboard market is growing at a rate of 3 to 5 per cent a year, driven mainly by demand from China, India and Eastern Europe where a lot of stuff is needed as they replace their ageing stock of buildings. For Saint-Gobain, a deal would take them into these new territories, enabling them to sell more glass.

It is almost unheard of for a hostile cash bid to fail. Strangely enough, the last time this happened was when the cement maker Blue Circle escaped the clutches of France's Lafarge five years ago. You may wonder what is it about the building materials industry that gets French pulses racing.

Lafarge was left with a 29 per cent stake which meant that no- one else could realistically buy Blue Circle without its agreement. After a year, the French came back with an agreed price and got the company. Unless Saint Gobain comes up with more money, history may be about to repeat itself.

Adidas puts a spring in its step

It's not only the French who are on the march. Yesterday Adidas of Germany took a run at Reebok, agreeing to buy the rival US sportswear maker for $3.8bn. The deal will bring the world's number two and number three sports good companies together. It will also put David Beckham, the rap artist Missy Elliot and Venus Williams under one roof. But Adidas's Herbert Hainer is looking for more than celebrity endorsements. His ultimate goal is to give the market leader Nike a run for its money in the US, which accounts for half the world market for sports wear. Reebok will bring Adidas a presence in basketball, hockey and baseball, creating a combined business with about 20 per cent of the American sports footwear market. That is the kind of number that starts to make competition authorities jumpy until you consider that Nike's share is 36 per cent.

Reebok's boss Paul Fireman has promised to stick around to run the Reebok brand. But since he and his wife Phyllis will walk away from the deal with $650m for their 17 per cent stake, working for a living is going to get a lot harder.

Mr Hainer, meanwhile, has the task of getting the transaction past the regulators and then integrating the two businesses at the same time as keeping his eye on the ball in Germany where Adidas is one of the major sponsor's of next year's World Cup.

In some senses, the Reebok deal is a defensive one, designed to counter Nike's increasing inroads into its traditional dominance of the football market. But Mr Hainer will have to run fast to justify the price. Luckily, his company has just the thing, the Adidas 1 - a $250 sports shoe with a motor and microchip in the heel.