View From City Road: Hidden agendas at the 'Sun'

It is a while since Rupert Murdoch has indulged in one of his periodic shake-ups of the British national newspaper market. Over the past few years he has concentrated his attentions on satellite broadcasting, Hollywood film-making and persuading his banks not to foreclose on him. So why should he choose now to launch a tabloid price war? And what does he want out of it?

The City has two theories. The first is that he is trying to weaken Mirror Group Newspapers' share price to put off an impending placing of the 54.8 per cent of MGN's shares held by the administrator of the Maxwell private companies.

This assumes that the administrator was close to a placing (and there are heavy hints that he was) and that if the placing of the shares was put off, the administrator would be more likely to sell the stake to a single buyer, so precipitating a bid for MGN.

But it is hard to see that there would be any advantage to Mr Murdoch in a postponement or a bid. Why should the Daily Mirror be any less of a competitor if MGN is owned by a proprietor with big pockets? With MGN shares off less than 10 per cent since the price war began, this tactic, if indeed it was a tactic, has anyway failed.

The more convincing theory is that the price cut is aimed at forcing United Newspapers to close the Daily Star, which loses pounds 13m a year. With United trying to cajole shareholders into stumping up for a pounds 190m rights issue, and there being much City unhappiness about the relationship between United's chairman, Lord Stevens, and the late Robert Maxwell, a price war brings the problems at the Star into sharp focus.

Mr Murdoch probably believes that more Star readers are likely to move to the Sun than the Daily Mirror. It's a gamble, but if it comes off shares in both News International, at 216p, and MGN, at 151p, will look cheap and United, at 521p, overpriced.