LMS case against BSkyB triggers Pearson nerves

MARKET REPORT

There were signs of nerves ahead of today's expected judgment in the long-running court case brought by London Merchant Securities against the original shareholders in British Satellite Broadcasting, now part of BSkyB.

A ruling in favour of LMS, which has accused the former shareholders of treating minority investors unfairly, could hamper Pearson's plans to sell its direct 9.7 per cent stake in BSkyB. The stake is worth pounds 500m.

Pearson's shares fell 6p to 637p, and Granada, which has a 6.54 per cent holding in BSkyB, eased 2p to 648p.

LMS, an investment and property group, has claimed that minority shareholders were prevented from subscribing for new shares to maintain their stakes when British Satellite Broadcasting was restructured, and subsequently merged with Sky TV to form BSkyB.

A spokeswoman for Pearson categorically denied a rumour yesterday that the judgment might be pre-empted by a pounds 100m-plus out-of-court settlement with LMS. "We are all waiting for the judgment," she said.

LMS firmed 1p to 105p. The rise, however, owed more to the company's sale of 12.5 million of its 24 million shares in First Leisure, the discos and tenpin bowling group chaired by Michael Grade.

The sale spawned some speculation that it might lead to LMS using the net pounds 38.75m proceeds to fund the possible purchase of shares in BSkyB if the court rules in its favour.

LMS, chaired by Lord Rayne, who recently vacated the same post at First Leisure, said the proceeds represented a pounds 32.5m surplus over cost, and exceeded the balance sheet value by almost pounds 17m. It added that its remaining 6.95 per cent stake would be held as a long-term, core investment.

Cazenove, broker to both LMS and First Leisure, handled the disposal. The shares were placed across several institutions at 313p, and First Leisure closed just 2p down at 324p.

Several other large placings kept the market busy, particularly some changes made to the investment portfolio of Baring Asset Management.

The fund management outfit, now controlled by ING, which rescued Barings, sold 16 million shares in Hickson International, the chemicals group. NatWest placed the 9 per cent stake with institutions. Hickson eased 1p to 121p.

BAM did another bought deal with brokers at Morgan Stanley on 26 million shares in the Sedgwick insurance company. The shares represent 4.76 per cent of Sedgwick, off 1p to 136p.

Shares in Lasmo eased 1p to 177p as an early-morning rumour that Enterprise was finally going to offload its 9.8 per cent holding in the oil company failed to turn into reality.

Lasmo's price was also overshadowed by the company's cautious comments on the outlook for the oil price as it announced a return to profits.

British Petroleum, however, was lively, rising 6.5p to 475.5p on the discovery of two "major" oil and gas sources in the Llanos foothills in Colombia.

Volume trading across the market was obviously helped by the placings, although the total of 787.4 million was quite respectable by recent performances. Share price movements, however, were quite contained. Cries of "So what?" in reaction to the latest batch of economic news, and "howzat" as the West Indies wickets tumbled in the Test match were heard loud and clear from dealing floors across the City.

Despite the distractions of the television, dealers still kept an eye on their screens in anticipation of the much-talkedabout mega-bid that is said to be about to happen.

All the speculative gossip points towards the Hoare Govett broking firm, whose corporate finance department is said to be clocking up overtime at an alarming rate and to have put a temporary ban on holiday leave.

Hoare's clients don't come much bigger than Hanson, up 1p to 223.25p, and the name of the master of corporate raiders is being linked by speculators to just about anything that is big and ripe for breaking up.

Zeneca, the drugs group spun out of ICI, is one on the list of Hanson's so-called favourites. Shares rose another 7p to pounds 11.35. Roche of Switzerland is viewed as another possible buyer of Zeneca.

Excluding the perceived Hanson target list, the market's list of potential bid candidates grows longer as each day passes.

Scottish Radio was yesterday's addition. Shares climbed 17p to an all- time high of 324p.

Consolidation in the radio industry is moving ahead at a rapid pace, and Scottish Radio has its own plans to buy the main broadcasting assets and licence of the unquoted West Sound Radio.

Action among the real bids saw Scottish Power, down 1.5p to 313.5p, buy another 1.5 million in Manweb, down 12p to 897p, to take its stake to 12.5 per cent.