City Republic: does Darling really have a mind of his own?

LONDON - As the Chancellor hands out £120 to basic rate taxpayers, Stephen Foster looks at the reasons behind the 'windfall', and ponders the predicament Carphone Warehouse finds itself in.

We only ask because the announcement of a £120 handout to basic rate taxpayers, everyone earning below £40,000 a year, by the Chancellor is a most un-Gordon Brown like wheeze.

Brown, whose disastrous decision to abolish the 10p tax rate caused the problem in the first place, would surely have chosen to remedy it by tinkering with his ghastly tax credits system.

What Darling has done is mollified Labour's rebellious MPs, compensated most of the people who lost out over the 10p cut and rather artfully injected an extra £2.7bn into an economy that needs the money.

It may not be quite on a par with George Bush's $1,000 a head handout in the US but it's a start.

The opposition parties are fulminating about bribes to buy votes in the forthcoming Crewe and Nantwich bye-election but so what?

Politicians are in the vote business and, anyway, Labour will still probably lose.

But Darling is showing he might not be quite such a patsy as Chancellor that many people thought.

Carphone Warehouse finds that a few days is a long time in business
Scroll back to the weekend and you find Carphone Warehouse's Charles Dunstone the hero of the hour, because his deal to team up with giant US electrical retailer Best Buy was supposed to free the company up to conquer the UK broadband business.

Now his target, Italian-owned Tiscali, has excluded Carphone from the bidding as its £550m offer for Tiscali's UK business didn't measure up to the big boys, chiefly Vodafone which has bid £1.1bn for all of Tiscali and is now the frontrunner in the race.

Vodafone is also keen on Tiscali's Italian business which it wants to merge with its recently acquired Tele 2. Seems like a perfect fit.

And City types are saying that Carphone might find itself on someone's shopping list now that it's stuffed with Best Buy's cash.

One doubts that this was quite what Dunstone intended.

Sorrell ups TNS stakes
WPP's Sir Martin Sorrell has increased his bid for researcher TNS to £996m but has been rebuffed a second time by the TNS board, which wants to effect a nil-premium (ie share swap) merger with Germany's GfK.

TNS's rejection was pretty emphatic as these things go, saying it "had no hesitation in rejecting this revised proposal which substantially undervalues the company even on a standalone basis (ie without GfK)".

But Sorrell isn't bidding for GfK.

What TNS has to do now is explain exactly what its "jam tomorrow" strategy with GfK will deliver in terms of savings and increased profits down the line. TNS says it will report shortly.

So far, there's little sign of TNS shareholders revolting at the board's rejection of WPP, so Sorrell is rather boxed in.

It would be highly unusual for any company to raise a third offer by more than it raised the second, so somewhere slightly north of £1bn looks as far as he can go.

This is still pretty eye-watering for a research firm, but still might not be enough.

Another problem for Sorrell is that everyone, including him, expects WPP's profits to fall back in 2009 as weakness takes hold in the economy, so a deal that hits earnings per share even temporarily is very hard to justify.

So he has even less wriggle room. Unless he sells something, of course.

Is EDS a deal too far for all-conquering HP?
Computer maker HP's shares fell 7% yesterday as Wall Street digested its $14bn bid for IT services company EDS.

HP has been one of the great stars of American business recently under CEO Mark Hurd, integrating rival computer maker Compaq and moving ahead to be the world number one ahead of Dell, without sacrificing its margins.

EDS was founded by maverick US businessman Ross Perot, who tried to become president a decade or so ago.

Buying it would double the size of HP's services business, making it a more credible rival to IBM and the big consultancy firms.

But IBM offloaded its computer business to the Chinese a few years ago and there's clearly a fear abroad that the two businesses don't mix.

Big computer contracts (EDS has carried out a number in the UK in recent years, with mixed fortunes) are subject to cutthroat bidding and big damages if the systems don't work.

Even new master of the universe Mark Hurd might have to walk away from this one.

Fidelity expert Bolton in stock market warning
Anthony Bolton ran Fidelity's top-performing Special Situations Fund for 27 years (he was particularly adept at buying and selling media stocks and helped force out Michael Green as Carlton and Granada prepared to merge and form ITV) so when he warns that we're in a "bear market rally" (aka "dead cat's bounce") people tend to listen.

The FTSE 100 has rallied 15% from the low reached on March 17 when Bear Sterns hit the buffers, settling at a pretty comfortable 6,200 or so.

But Bolton reckons we're still in a long-term "bear" market (when shares fall) and the bottom might not be reached until next year.

If he's right it will mean more deals are on the way.

Credit markets are loosening for decent assets; it looks as though the bankers who backed the privatisation of Boots are finally going to be able to offload the £9bn of debt they provided to finance the deal and RBS has had a flurry of offers for its Direct Line and Churchill insurance businesses.

If prices start to fall again, perennial takeover favourites (like ITV) will start to reappear on people's shopping lists.

Stephen Foster is a former news editor of ±±¾©Èü³µpk10, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog and Politics of the Media for Brand Republic.

Topics

Market Reports

Get unprecedented new-business intelligence with access to ±±¾©Èü³µpk10’s new Market Reports.

Find out more

Enjoying ±±¾©Èü³µpk10’s content?

 Get unlimited access to ±±¾©Èü³µpk10’s premium content for your whole company with a corporate licence.

Upgrade access

Looking for a new job?

Get the latest creative jobs in advertising, media, marketing and digital delivered directly to your inbox each day.

Create an alert now

Partner content