PRESS DIGEST - British business - June 28

The Sunday Times

RAIL FRANCHISE TALKS COLLAPSE

Talks between National Express (NEX.L) and the Department for Transport over the east coast main line have ended in deadlock just three days ahead of a crucial trading update from the bus and rail group. National Express, which faces heavy looses from its current agreement, needs to resolve the matter before it launches a 400 million pound rights issue. City sources say the two sides were close to agreeing a management contract to replace the existing franchise that would allow National Express to continue running trains on the line for an agreed fee, while officials would retain the right to re-let the contract. However, talks collapsed when the department refused to replace the current contract.

THAMES WATER BOSS ON ACQUISITION SPREE

David Owens, chief executive of Thames Water THWEF.PK, plans to reshape the industry by taking over a dozen smaller rivals. The government is considering easing the sector's merger restrictions and Owens believes his strategy would lower bills and improve both customer service and investment. Of the 12 "diddy little water companies around the south east", Owens identifies South East Water, Dee Valley Water and Sutton and East Surrey Water as vulnerable. Tony Wray, Owens' counterpart at Severn Trent (SVT.L), has also expressed a desire to merge with rivals. However, allowing regional monopolies to grow would prove controversial in an industry renowned for poor service.

TELECOM GROUP HEADS FOR 200 MILLION POUND FLOAT

Daisy Communications, one of the UK's fastest-growing telecoms firms, plans to launch on Aim at the same time as it raises funds in an effort to fund acquisitions. Chief executive Matthew Riley is believed to have been guided by retail entrepreneur Philip Green on the transaction.

The Sunday Telegraph

SAINSBURY'S CLOSES IN ON NEW CHAIRMAN

Former GUS executive David Tyler is one of a number of candidates being considered to succeed Philip Hampton as chairman of J Sainsbury's (SBRY.L). Tyler currently chairs outsourcing group Logica and is on the board of both Reckitt Benckiser and luxury goods group Burberry. Others thought to be under consideration include John Peace, who also sits on Burberry's board. The new chairman will be joining the supermarket group at a time when it is beginning to show it can match the impressive performance of rival Tesco (TSCO.L).

PROPERTY VENTURE DEFIES SLUMP

London & Stamford (LSP.L), the new property venture set up by Raymond Mould and Patrick Vaughan, has apparently defied the slump in the commercial property sector. The early success of the venture has seen their advisory company LSI management collect over five million pounds in fees. The two men have gained a reputation for being able to accurately predict property cycles and the payout follows London & Stanford's posting of a 20.1 million pound pre-tax profit in the first full financial year since its 2007 flotation.

The Independent on Sunday

DAVIES TURNS DOWN TOP JOB AT LLOYDS

Trade minister Lord Davies is expected to turn down an offer to take up the chairmanship of Lloyds Banking Group (LLOY.L). The search is on for a replacement for the departing Sir Victor Blank and UKFI chief executive John Kingman is known to have been courting Davies over the past few weeks. Davies is said to be enjoying his ministerial role too much to want to return to the commercial sector. Other names under consideration include former Citigroup chairman Win Bischoff.

REBEL INVESTORS LINE UP AGAINST MARSTON'S CASH CALL

A number of institutional shareholders in FTSE 250 pubs group Marston's (MARS.L) are set to vote against a 176 million pound rights issue announced by the group earlier this month. Marston's shares have lost three percent since then and more than a third of their value since the start of May. The struggling pubs sector has seen a number of rights issues in recent months, including 200 million and 375 million pound rights issues by Greene King (GNK.L) and Punch Taverns (PUB.L) respectively.

THE GOOD LIFE BECKONS FOR MORE MIDLANDS GARDENERS

Local Allotments, the brainchild of a group of Midlands business people, is attempting to raise 2.24 million pounds from investors. The venture essentially buys up local gardening plots then rents them out to those seeking allotment space. Shareholders can invest anywhere between 2,500 and 50,000 pounds and Christian Sanders, one of the founders, is quoted as saying: "As allotment rents are rising, I believe that allotment clubs will represent an attractive investment."

The Observer

SUPERMARKETS SEIZE CHANCE FOR LAND GRAB

Supermarkets are using the crash in the property market to seize sites for new stores. The land grab will consolidate the supermarkets' stranglehold over the retail sector and alarm small businesses, MPs and green groups. Senior property executives believe local authorities may relax objections to new superstores as lower yields from business rates and rising unemployment become major concerns. Tesco (TSCO.L) and Asda (WMT.N) are committed to opening 2.5 million square feet of new space in 2009, Sainsbury's wants to add 2.5 million square feet to its floorspace by 2001, and Morrisons (MRW.L) is on track to open one million square feet by January 2011.

SOUTH AFRICAN MINERS TO STOP XSTRATA AND ANGLO DEAL

South Africa's National Union of Mineworkers has intervened in the proposed merger between Anglo American (AAL.L) and Xstrata (XTA.L), saying any deal would "lead to unacceptable job losses" at Anglo. Anglo accounts for three percent of the country's GDP and employs 110,000 people in dozens of mines across South Africa, Botswana and Namibia. The NUM said it did not believe assurances given by the chief executive of Xstrata, Mick Davis.

DARLING THWARTS KING'S BID TO TAKE WIDER POWERS

The Observer has learned Chancellor of the Exchequer Alistair Darling is to deny Bank of England Governor Mervyn King the power he is demanding to prevent another financial meltdown until after the next election. The overhaul of banking regulations, expected to be announced shortly by the Treasury, will not contain any new legislation to address the complaint by the governor that he "can do no more than issue sermons or organise burials" when the financial system is in crisis. The Treasury is nervous about handing power to the Bank, such as restricting credit in boom years, which could provoke public fury. Instead of promising King new powers, the Chancellor will publish a green paper to kick-start a longer debate on the so-called "macro prudential" measure to prevent dangerous bubbles.

The Mail on Sunday

TONY BALL ON SHORTLIST FOR ITV CHIEF

Tony Ball, the former head of BSkyB has been put on the shortlist of contenders for the role of chief executive at ITV (ITV.L). The broadcaster's board is due to interview candidates in late July with an appointment expected to be announced by the first week of August. Ball, who initially refused to take part in the process, is backed by some of ITV's major shareholders. Others believed to have been headhunted include Ben Silverman, co-chairman of NBC Entertainment and Universal Media Studios, but his salary expectations are expected to prove a problem.

HOT COOK TO START OPENING FRANCHISES

Frozen ready meals manufacturer Cook is set to benefit from a sales boom by opening three franchised stores. Founding brothers Edward and James Perry predict profits of around 1.3 million pounds on sales of 20 million pounds in 2009. Last year's profits reached 500,000 pounds. Edward said the group saw opportunities for growing its business in the weak property market and has been repeatedly asked about the possibility of offering franchises.

Prepared for Reuters by Durrants