City Republic: What the future holds for ITV and Jaguar

Stephen Foster looks at the implications of the Sky/ITV ruling, Indian plans for Jaguar, and wonders if there's light at the end of the credit crunch tunnel.

BSkyB decision puts ITV on the auction block
BSkyB has a month in which to appeal business minister John Hutton's decision that it must sell down its stake in ITV from 17.9% to below 7.5%.

And it has a case.

17.9% is not a controlling stake by any stretch of the imagination (when the Qataris bought into Sainsbury's they had 30% without telling CEO Justin King to stop selling cheap lager).

The difference, of course, is that BSkyB would never be allowed to take over ITV (or not until ITV's market share shrinks much further anyway).

A judge may decide that he or she doesn't want to take on the might of the Competition Commission and the government. As indeed might BSkyB.

But the Murdoch-controlled company is looking at a loss of £343m on its ITV shares, so delaying the sale date is probably in its interest (ITV shares inched upwards on Tuesday).

And if it won a case it could claim damages, which would be interesting.

But where does this leave ITV?

At the moment you can hardly give away media companies but, at some stage, the tide will turn.

If BSkyB does indeed have to sell it would sooner sell in one lot and 17.9%, while not controlling, is a handy platform for a takeover bid.

ITV shares are down nearly 60% from their year high of 124p so it's very firmly in the bargain basement. The company may currently be friendless in the City but its performance has turned round under CEO Michael Grade and programme director Simon Shaps, despite the headline stories about the re-installed 'News At Ten' losing out to the BBC's ten o'clock bulletin.

Grade has also managed to dump most of its remaining public service obligations (arguably bringing back 'News At Ten' is ITV's attempt at compensation for this) and he may even be able to get rid of the hated Contract Rights Renewal (which allows advertisers to reduce their spend in line with ratings) soon.

If he could just pay someone to take Carlton Screen Advertising off his hands his profits would rise by £8m or so straight away.

Eighteen months ago, former BBC director general Greg Dyke bid 130p a share for the company with a consortium headed by the mighty Goldman Sachs.

Might Dyke and Goldman be brushing off their plans?

Hedge funds and private equity companies are awash with cash (as indeed are overseas sovereign funds, although they might jib at the fuss a bid for ITV would cause). The hedgies just haven't been able to spend the money because their investors are frightened by falling markets and the supporting bank loans are too expensive.

But this will change.

So ITV is sitting up in the corner of the room with a "buy me, I'm a bargain" placard around its neck.

Keep an eye on Disney. The mighty mouse failed to crack the UK with its ABC1 general entertainment channel when it dithered over paying the price for a spot on Freeview.

Disney is also keen to find new markets for its big ESPN sports channel.

ITV, which was the first channel to broadcast Premiership football live you might recall, would fit the bill very nicely on both counts.

Now Jaguar really is looking like a bargain
Reports from India suggest that local carmaker Tata is to buy all of Jaguar and Land Rover (originally the plan was for a majority stake with Ford keeping a minority to guarantee component sales).

The mooted price is still somewhere between $1.5bn and $2bn, an absolute bargain if the new sporty XF saloon is anywhere near as good as some commentators say it is.

Even though Ford is losing buckets of money it still seems strange to be selling a good, maybe great, new car at the bottom of the market

It's also rather surprising that other carmakers like VW and Porsche (which is absolutely awash with money -- and owns 30% of VW of course) aren't interested.

VW, for example, has failed to crack the luxury sector with its Phaeton model and it knows what a good deal the right acquisition can be with Bentley. It also owns Lamborghini.

When Ford put Jaguar and Land Rover on the market it failed to spark an auction. Is it really too late?

Is the credit crunch reaching the end game?
Pillar of the Swiss banking establishment UBS wrote off a further $12bn on mortgage-backed securities yesterday, which means it will report a full year loss of over $4bn in a week's time (so it must be making money somewhere then).

This brings sub-prime related banking losses to over $100bn, with some Jonahs suggesting the figure could reach $300bn.

With housing starts in the US still falling (as are prices), there's plenty of ammunition for the doom mongers.

So how do you account for the following (reported in the FT today)?

The US S&P financials index is up 17.5%

The FTSE Eurofirst 300 banks index is up 13.5%, despite Societe Generale's little local difficulty.

Staggeringly, the US S&P 500 homebuilders index is up 52.5% in the past three weeks.

Some brave souls clearly feel that there's too much bad news in the price of these stocks and that the market is on the turn.


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