City Republic: the race for GCap and bad news for M&S

Shares in GCap, owner of Capital and ClassicFM, closed at 208p Tuesday, virtually doubling since Global announced it had bid 190p a share or £300m for GCap before Christmas.

At the time of the merger back in 2005, GCap was valued at an eye-watering £700m, so maybe Allen's bid wasn't as daft as it seemed.

The market clearly thinks that he, or another bidder, will go even higher (the shares hit 215p at one point).

Global, which is backed by the "Coolmore mafia" of sporting Irishmen (John Magnier, JP McManus, Dermot Desmond and Michael Tabor), failed in its bid for Emap's radio business after acquiring Chrysalis' radio stations including Heart.

The plan is clearly to become the biggest force in radio and apply some pressure on advertisers to restore the radio sector's margins.

But, assuming it's successful, will advertisers play ball?

Former GCap boss Ralph Bernard bet the house on digital radio, which so far hasn't delivered.

Commercial radio is more bedeviled than ever by the power of the BBC (which doesn't need to run those pesky ads that listeners clearly loathe). There's also the tidal wave of advertiser money going online to consider (and you can listen to the radio when you're online, which doesn't help either).

But the Coolmore boys clearly like a bet (JP McManus is the highest of high rollers, regularly cleaning out the bookies at the Cheltenham Festival).

Furthermore, most of their corporate bets succeed too. When John Magnier fell out with Alex Ferguson over the horse Rock of Gibraltar he promptly bought a big chunk of Manchester United, which he sold to the Glazer family at a large profit, and the rest is history.

Either way GCap looks toast, it's surely just a case of who buys it.

The shares rose further this morning.

Surely the Bank will cut rates on Thursday?
Just in case Mervyn King and his pals on the Monetary Policy Committee haven't made their mind up yet, the newly knighted Sir Stuart Rose popped up on the Today programme this morning (Wednesday) to point out that things were grim in the High Street and set to get worse.

M&S shares fell a staggering 16% this morning on news that like for like sales fell 2.2% before Christmas.

They're now close to the 400p Sir Philip Green bid for the company before Rose was parachuted in.

If Sir Stuart and all those models who appear in his ads can't turn back the tide, then no one can.

Apart from John Lewis and its supermarket offshoot Waitrose, which did well before Christmas, just about everybody else is struggling too, with a number of smaller retailers heading for administration.

Even Tesco can detect a move to value by hard-pressed consumers, promising to match the prices on 2,000 lines sold by discounters Aldi and Lidl.

A few less retailers wouldn't worry the Bank at all but consumers unable to spend certainly should, particularly with millions of cheaper rate mortgages due to be renegotiated in the course of 2008.

The last thing anyone wants, not least the government, is a wave of repossessions on the American model hitting the UK.

The Dow Jones Index on Wall Street plunged in late trading yesterday on a New York Times story (later denied) that big mortgage lender Countrywide Financial Corporation was about to apply for administration after heavy losses.

Prior to this, Wall Street had staged a minor recovery after days of losses. The fear caused by the housing market over there is almost palpable and another Wall Street boss, 73-year-old Jimmy Cayne of Bear Sterns, quit yesterday for misreading the sub-prime market.

Anything the MPC can do to stop that happening here (a housing crash, not rich investment bankers being thrown out) will be gratefully received.

Far East bucks the trend
If there's any better news in the global economy just now it's coming from the Far East.

Hong Kong and Tokyo staged modest rallies this morning despite the fall on Wall Street.

They don't have a sub-prime mortgage problem over there (which certainly helps) and consumer spending is still soaring away.

Last year, stock markets in Brazil, India and China all rose by over 60%, far ahead of the single figure gains in the US and UK.

Things will be more sedate this year, partly because the Chinese government seems inclined to allow its currency (historically pegged to the dollar) to rise to more realistic levels.

Clearly, even the Chinese feel they've got enough of a trade surplus to be going on with.

This is just one sign that the Far East is robust enough to decouple itself from what happens in the so-called "developed" economies.

Given what's going on those, it's just as well.

Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.