The collapse in February of the attempted merger with the US-based Morgan Stanley was

The collapse in February of the attempted merger with the US-based Morgan Stanley was only a temporary reprieve.That in turn has revived all the fears of three months ago, that London's bid to join the global premier league of investment banks was at an end. Many Warburg and Swiss Bank Corporation executives will be forgoing tomorrow's VE Day celebrations to hammer out a deal that they can present to an intrigued City, possibly as soon as the London stock market reopens on Tuesday. The merchant banking community is united in the belief that Warburg's days as an independent entity are effectively at an end. CITY analysts were putting the finishing touches yesterday to their predictions of the next phase in the struggle for the future of the SG Warburg merchant banking group. Pearson, owner of the Financial Times, would be the preferred buyer.. Possible rivals believe that could give Associated Newspapers a valuable inside track on the Herald's finances should interested parties be invited to submit sealed bids.But Associated could also fall foul of anti-government feeling in Scotland, because of its traditional support for the Conservative Party.

A float has consequently been postponed for at least two years. In the meantime, a trade sale seems the most likely solution if the management team decides a long wait for their rewards is too risky. One option that has been discussed is a sale to Midland Independent Newspapers, owners of the Birmingham Post, which set off a year ahead of the Herald group down the buyout route and successfully floated last year before the price war.But there are doubts about how the citizens of Glasgow would react to the sale of their favourite reading matter to an English group whose chairman is Sir Norman Fowler, a former chairman of the Tory Party.Midland Independent Newspapers' shares are also below their peak, and there is some doubt whether the Herald shareholders would be happy with a share-based offer from MIN or whether MIN could afford a cash sweetener.A more likely option would be a bid from Associated Newspapers, which already has a contract to print the Scottish edition of the Daily Mail on Herald presses. THE newspaper price war has torpedoed the flotation plans of the management team that bought the Glasgow-based Herald newspaper group from Lonrho three years ago. Although the Herald, headed by Liam Kane, operates on the fringes of the main newspaper battleground, the price war has depressed circulation.

The Canadian group had even co-sponsored a study with the Mirror and Virgin consortia into the cost of retuning videos.The final equity structure gives CanWest 29.9 per cent, SBS 30 per cent and SelecTV 20 per cent.Profile, page 16. The negotiating team was within minutes of deciding which of two companies would fill the final slot in the equity structure when news broke that SelecTV was available.The independent British producer of shows such as Birds of a Feather was already acquainted with CanWest and the other members of UKTV, Australia's Network Ten and the Scandinavian Broadcasting System.Talks between CanWest and other interested parties had been going on since November. Rupert Murdoch's BSkyB, the pre-bid favourite, seems out of the running after offering just £2m.The ITC would also have to reckon on a lawsuit if it uses one of the get-out clauses in its invitation-to-apply document to dump UKTV. "I would be very concerned if any government acted deliberately against one individual," said Mr Asper.UKTV has been under fire since Tuesday, when the ITC opened bids from four consortia eager to run Britain's last available terrestrial channel.Some critics complained that it is largely foreign-owned, while others pointed out that it was a last-minute entry, which was scraped together from the ruins of the NBC-Mirror Group-SelecTV consortium that pulled out eight days before the auction closed.But the Independent on Sunday source said the CanWest package was essentially in place two weeks before that. "We wouldn't have submitted our bid unless we were certain the business plan would give a fair return to our investors."If it did throw out the UKTV bid, the ITC would have to decide how to choose between the consortia led by Richard Branson's Virgin and Pearson, which both bid £22,002,000. David Asper, head of the company, refused to comment on details of its bid, sticking to an earlier state- ment that advertising was hard to predict beyond two years."We've been very conservative and cautious," he said. They won't know that until they start doing it."A serious shortfall could lead to a vicious circle in which programming budgets were trim- med, costing the new channel viewers and ultimately reducing its advertising support.