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Sunday newspaper round-up: Northern Rock, J. Sainsbury, London Stock Exchange

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Date: Sunday 16 Sep 2007

LONDON (ShareCast) - The chief executive of crisis hit bank Northern Rock has effectively issued an invitation for a bidder to step in and rescue the bank after admitting in an interview with the Sunday Telegraph that it would be a “long slog” for the company to recover under its own steam.

However, the Sunday Times reports that one take-over bid for Northern Rock has already been blocked. Detailed talks between Northern Rock and Lloyds TSB took place but a prospective bid by Lloyds was blocked by the Bank of England and the Financial Services Authority, for fear it would unsettle financial markets. The Sunday Times claims Royal Bank of Scotland also made an “opportunistic” approach to Northern Rock.

The Independent on Saturday quoted analysts as saying that a bank with excess deposits would be the most likely candidate for the role of “white knight” for Northern Rock. In the UK, HSBC and Standard Chartered are the only banks in this position, in the opinion of Alex Potter at broker Collins Stewart, but both banks are concentrating on expanding in Asia. Dutch bank ING was touted as a likely bidder.

According to the Sunday Times, Northern Rock customers have withdrawn more than £1.5bn since the bank’s cash-flow crisis became public on Thursday night, and one senior banker has predicted a further £12bn of withdrawals as postal account holders join the stampede for the exit.

City analysts believe the world’s investment banks will have to write down up to 10% of $300bn of leveraged loans on their books when they report third quarter results, reports the Sunday Times. In some instances profits for the third quarter could be virtually erased, the paper added.

The pension deficit at supermarket chain J. Sainsbury could be an insurmountable stumbling block for the proposed bid by Qatari-backed fund, Delta Two, the Sunday Telegraph believes.

Sainsbury has a pension deficit of £103m, down from £658m last year, on a fund with £4.4bn of liabilities. There is a clause in Sainsbury’s pension trust that allows the trustees to demand increases in the company’s contributions if there is a change of ownership, and the Sunday Telegraph believes they intend to invoke this clause in the event of Delta Two taking the supermarket group private.

The Observer expects talks between Delta Two and Sainsbury to come to a head this week, with the supermarket’s chairman Sir Philip Hampton likely to request the Take-over Panel to ask Delta Two to “put up or shut up” if talks remain deadlocked.

Rival supermarket chain Tesco is contemplating a makeover of its non-food web-site, the Sunday Times says.

Reports indicate that former Argos director Steve Robinson, the head of its non-food internet division, Tesco Direct, could be ousted as the board loses patience at the number of glitches experienced in the roll-out of its non-food offering on the web.

The rumours coincide with news that Sainsbury has hired another former Argos director, Tanya Lawler, to oversee the expansion of Sainsbury’s online operations.

The Qatari Investment Authority (QIA) has made an offer, equivalent to 1400p per share, to buy NASDAQ’s 31% stake in the London Stock Exchange, the Sunday Times said.

The NASDAQ board is considering the proposal, with insiders believing NASDAQ will take the Qatari money to finance a knock-out bid for OMX, the Scandinavian bourse group.

Royal Bank of Scotland put fitness group Cannons up for sale almost a year ago but the process has only moved forward in the last month, the Sunday Telegraph wrote. The Telegraph said preliminary merger talks with LA Fitness are taking place, but other suitors are still in the running. Industry insiders believe potential bidders could include Virgin Active, Fitness First as well as private equity buy-out specialists.

Scottish media group SMG has yanked the proposed sale of Virgin Radio after offers came in below its £80m target price, the Sunday Telegraph reported. SMG will put Virgin Radio back in the shop window once the credit markets settle down.

However, the Observer believes that SMG is still actively considering a sale or flotation of Virgin Radio, though it concedes that these plans were dealt a blow by the defection of the station’s chief executive to Capital Radio last month. The Observer believes SMG has also put the “For Sale” sign up on its billboard advertising unit, Primesight, and cinema specialist Pearl & Dean.

The Observer reports that Cable & Wireless is preparing for a break-up in the new year. Management believes the value of the company will rise as its recovery gathers pace. Broker Cazenove has predicted that the group should beat its sales forecasts, thus activating a controversial £200m bonus package for senior executives.

Kingfisher will unveil a major overhaul of its DIY-chain B&Q when it announces its results this week, according to both the Sunday Telegraph and the Observer. B&Q will be targeting female shoppers as it moves into the home decoration market, which is worth three times the DIY market, the Telegraph revealed.

The Observer said B&Q has decided to hold fire on make-overs at some of its superstores until 2008, when it is hoped that the current downturn in the fortunes of DIY retailers will be over.

BAE Systems is celebrating its involvement in the world's biggest defence deal, the Observer revealed. BAE is part of the consortium that has just landed a widely predicted £40bn deal to supply 72 Eurofighter Typhoons to Saudi Arabia.

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