Pilkington predators need only wait

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The Independent Online
PILKINGTON has been the City's favourite bid target since BTR was vanquished in 1987. Investors whose shares are now worth 85p may regret having turned down BTR's 200p and are unlikely to be so loyal now.

But who will bid? Neither BTR nor Hanson would share Pilkington's determination to cover Europe and so would have little compunction in cutting its 20 per cent over-capacity. But BTR is likely to prefer a target like Lucas, Hanson may not want to be saddled with Pilkington's ACT problem, and foreign glassmakers would be ruled out on competition grounds.

That does not mean there is no bidder out there. But, with Britain still flat and Germany on the way down, there is little reason to move in the next six months. All predators have to do is wait for Pilkington to dig itself into an even deeper hole.

INCHCAPE shares have been falling on fears of a large rights issue to fund an acquisition. The target is thought to be Gestetner, the office machines group. Another reason for the fall is concern over the trader's exposure to Hong Kong in the light of the decline in relations with Peking. But Inchcape is also a player in China, so is unlikely to come unstuck in 1997. As for an acquisition, some analysts say they would like to see some sort of move from what is a conservatively run group.

Sea change? GRAIG Shipping, which recently announced a takeover approach, is thought to have been in talks with itself, as it were. The Williams family, which already controls over half the group, is likely to launch an Alan Sugar-style offer to buy out the minority.

Both the ordinaries and the 'A' shares soared by over 40p to 123p last week but some reckon the shares are worth nearer 200p. The hope is that the Williams family, the last big shipowners in Cardiff, will prove real gents and offer a price nearer that 200p than the current price. We shall see.

ON 31 December, Thames TV will go off the air thanks to its loss of the broadcasting franchise. In the next few days, however, it is likely to hear whether the broadcasting authorities will allow it to go ahead with Channel 5.

Thames's future off the air looked modest but healthy. A range of deals, such as UK Gold, to supply programmes ensured a decent turnover. But it needs to start broadcasting again to recapture the massive cash cow of advertising revenue. Hence the importance of Channel 5.

The new channel, however, looks a big risk. Thames is the only contender for the licence since all the others decided the venture was uneconomic and pulled out. If the worst comes true, Channel 5 will wipe out a large part of Thames's remaining profits. If it comes good, however, the company could turn into a goldmine.

Waking up

SLEEPY Kids, the independent cartoon producer, has seen its shares soar from 6p to more than 30p in the past few weeks, thanks to the purchase of exclusive worldwide rights to Budgie, the helicopter character created by the Duchess of York. But while Budgie, managed by John Bryan, the Duchess's friend and financial adviser, looks set to prove a steady income earner, Sleepy Kids is not resting on its laurels.

Other book tie-ups are being examined, the company is believed to be considering changing its name to something more dynamic, and there is talk of a large acquisition in the offing.

CONSUMERS angry at the size of their water bills could ease the pain by investing in Southern Water, among the brightest of the water utilities. Its interims on Tuesday saw only a modest advance in profits to pounds 63m because they do not include the pounds 6m exceptional profits from disposals included in last year's result.

The dividend, however, will be up nearly 10 per cent to more than 7p, implying a full-year payout of about 21.3p. Dividend cover is a comfortable three times. The outlook is good because Southern has obtained one of the best increases in charges of any of the water companies: RPI plus 3.9 per cent.

This bodes well for the future at a time when earnings may start to show some slowdown thanks to recession.