Hefty cash-raising exercise takes BSkyB out of orbit

MARKET REPORT

Shares of BSkyB, the high flying satellite television giant, came tumbling nearer to earth as the stock market sensed it is involved in a huge cash-raising exercise for the Murdoch empire. The shares fell 42.5p to 636p. On Monday they seemed about to break through 700p. A year ago the price was 365p.

Another factor nagging at sentiment is the proposed new cable grouping spearheaded by Cable & Wireless which heralds much tougher competition for the satellite broadcaster. And, just to undermine sentiment even further, the communications regulator, Oftel, surprisingly banned BT from continuing a promotion involving BSkyB.

Merrill Lynch is leading the cash chase. It is attempting to raise at least $1bn, possibly as much as $2bn, for an American arm of Rupert Murdoch's News Corporation. The media giant was said to be issuing loan stock which could be convertible into BSkyB shares. The Australian-based News Corporation owns 40 per cent of the satellite station.

It is thought that up to 10 per cent of BSkyB's capital could be subject to the conversion if the offer receives the impressive support the Murdoch interests expect.

C&W's cable merger continued to pull in buyers. At one time the shares were up 14p but closed 4p higher at 471p. Other communication groups caught in Tuesday cable excitement gave back some of their gains.

The market, after a modest early flourish, was browbeaten by authoritative Bundesbank comments that German interest rates would not move lower and New York weakness which seems to be inspired by worries that a victorious Bill Clinton would be tempted to indulge in pet economic projects which would hinder the US economic recovery.

The FTSE 100 fell 28.8 points to 4,028.4 with the supporting indices also giving ground.

Oils, reflecting the recent crude price strength, bucked the trend with British Petroleum and Shell moving ahead. Premier Oil, up 0.75p to a 12- month high of 33.75p, has increased its Pakistan operations in a $33m deal. The company has also acquired a presence on the Irish share market. Chief executive Charles Jamieson wants a higher Dublin exposure because Irish investors are particularly active in resource shares. Cairn Energy, deeply involved in Bangladesh, is also looking at an overseas share presence - its chosen land is Australia. The company is bidding for Australian oil company, Command, and will probably opt for a "down under" listing if it wins. The shares shaded to 368.5p.

British Gas added 1.5p to 186.5p on suggestions Shell is prepared to pounce, presumably without even waiting to see the Monopolies and Mergers Commission report on Gas's important storage and transportation arm.

Ladbroke, down 5.5p to 199.5p, and some other leisure shares were hit by the National Lottery extension. EMI spun 23.5p lower to 1,256.5p following the Polygram profits warning.

Matthew Harding's death lowered Chelsea Village, owning the football club, 4p to 85.5p. His insurance company, Benfield & Rea, also lost 4p - to 119p.

Yorkshire Group, the chemical business, added 8.5p to 232p in, for the second day, busy trading. Holliday Chemical, little changed at 131.5p, is the favourite to strike. In the past year Yorkshire shares have fallen from 305p on disappointing trading although a recovery is thought to be under way.

House of Fraser, the department stores group, lost 3.5p to 141.5p; Cazenove was said to have crossed shares at below the then market price.

South West Water splashed 21p higher to 701p. NatWest Securities says buy. The twin MMC reports into the bids from Severn Trent and Wessex Water are due soon and NatWest says it "finds it difficult to envisage a scenario in which a bid is not viable".

The German interest rate comments lowered RMC. Caradon, the building materials group hosting an analysts' visit to Germany, fell 4.5p to 249p with Kleinwort Benson said to be cautious.

Norcros, another building materials group, held at 93p. Albert E Sharp rate the shares a recovery buy; it is looking for profits to improve from pounds 7.1m to pounds 11.7m this year and then reach pounds 14m. The shares were 204p 30 months ago.

Bakyrchik, seeking gold in the former Soviet Union and thought to be attempting a cash-raising exercise, fell 15p to 197.5p as it was belatedly realised the stake of a George Soros fund had fallen below the 3 per cent level.

TAKING STOCK

rSudden life at SEET, the textile group. The shares jumped 14p to 57.5p, a two-day gain of 20p. It has for long been regarded as a candidate for a reverse takeover and the Stevenson family, with 25 per cent, could be on the verge of slipping its Edinburgh Woollen Mill into SEET. The company has staged a profits recovery and in May paid pounds 1.4m for a children's clothing maker.

rWestmount, one of the companies with Falkland Islands exploration ambitions, gained 4p to 34.5p. It has a 20 per cent interest in Desire, where former Falkland Governor Sir Rex Hunt is a director.

rPremiere, the employment agency, held at 130p. Independent researcher Roger Hardman is looking for profits to grow from pounds 788,000 this year to pounds 1.3m in 1998.