Gatward Exits Tvs; Pays Price For MTM

James Gatward, who spearheaded TVS Entertainment’s successful bid for the south of England commercial tv franchise in 1982 and later led the audacious $320 million takeover of L.A. producer MTM Entertainment, will play no part in either company’s future.

The former TVS chief exec, who was shunted aside as head of the group in a Christmas boardroom coup (he retained his post as head of the company’s U.K. tv interests), resigned Feb. 11 as head of TVS Television after a stormy meeting with new chairman Rudolph Agnew.

Move not unexpected

Most observers had doubted Gatward would settle for second-in-command status to Agnew, former chairman of giant mining group Consolidated Gold. Agnew’s willingness to have a former chief exec in his ranks was also queried.

Although TVS says no official decision has been taken about the fate of MTM, the company is effectively on the block. Mel Blumenthal is reportedly heading one of two management buyouts while Disney has also been mooted as a potential buyer. Sale price, per one anaylst here, is almost impossible to gauge, but could be anywhere from $60 to $200 million – a far cry from the $320 million purchase price.

Gatward, who with a five-year rolling salary of $500,000 was the highest earning ITV honcho, engineered the ambitious takeover of MTM, largest ever overseas investment made by a British tv company.

At the time, the rationale behind the deal was self-evident: Although TVS said it was confident about retaining its ITV franchise in the upcoming sealed-bid auction, the unpredictability of the new franchise system called for diversification. Takeover of a blue-chip producer like MTM (“Hill Street Blues,” “St. Elsewhere” and “Lou Grant”), guaranteed TVS a place in the international production biz no matter what happened to its U.K. tv franchise.

The unwritten agenda was more complex. Although TVS was the third largest company in the ITV network (in terms of ad revenue), it was never accepted as a programming equal by the so-called Big Five (Thames, LWT, Granada, Yorkshire and Central). The only way TVS could didn’t buy into TVS and MTM as a purely financial operation. It was to learn about how British television and American production companies work. We certainly learned a lot of lessons.”

Mallet said even loss of the franchise would not dissuade his firm and TVS’ partner, Canal Plus, from further investment in the U.K. and the U.S. “We’re not going to back out of the U.S. or Britain. Au contraire. We’ll be back even stronger now that we know how to handle the situation better.” He refused to speculate on what those future investments might be.

“I think our chances are better than ever to get our franchise renewed now that we’re finally resolving our financial problems,” he noted.

This may be the case, say observers, but why did it take so long for the French to get decisive about selling MTM?

Indeed, the first board debates concerning MTM’s losses began two years ago, with the board finally acting last December.

In the meantime, TVS’ share price plummeted to one quarter of its value when Generale d’lmages and pay-tv channel Canal Plus purchased 20% of the British broadcaster for a total of ($100 million). “The French just sat on the board and did nothing even though they held the financial power,” said one source.

“There are various cultural differences such as the language and even the British sense of humor,” said Mallet. “Everytime we asked a question about MTM we would be told that the situation will turn around. We believed it. If we were in France dealing with a French company we probably would have not believed it so easily. There are subtleties in the ways of asking questions and getting answers that escape you when you’re dealing with another culture.”

“We were foreigners and we were in the minority on the board,” added Lescure. “Gatward had the board stacked with his ‘yes’ men. He controlled everything. I tried to tell him for about a year that he had to sell MTM or at least he had to relinguish control and appoint an American CEO. You can’t run an American company from London. But he would never listen.”

Mallet, who also was present during those discussions, commented, “Gatward would tell us that he would try to find someone, but said it took long because it was so difficult to find the right person. He would also say that he would try and sell the company. I don’t think that he ever intented to.”

As time passed on, the French felt even less powerful to act. “Our active recourse would have been to ignite a revolution on the board against Gatward,” said Lescure. “But we are French. We could not imagine doing such a brazen move in a British company.”

It was only last May that Mallet and Lescure decided to draw the battle lines. “Until then we believed what we were being told about MTM, that it would turn around with hit shows, etc.,” said Mallet. “But then we realized that we were not getting the whole story. At worst we were being lied to. At best, TVS and MTM management didn’t fully understand the situation themselves.”

“I felt that we were being manipulated,” Lescure strongly added. September, the French decided to finally step in. They did so stating that if Gatward didn’t sell MTM, they would resign from the board and go public with their discontent. Their position was formalized at a December board meeting.

When Canal Plus first invested in TVS in August 1988, it had plans to co-produce programs, as well as other possible co-ventures. Buying MTM and partnering with Canal Plus was a hedge for TVS against the possibility that they might lose the ITV franchise. “But we never got that far,” said Mallet. “The MTM situation became the top priority and main preoccupation.”

Generale d’Images part owns Canal Plus, UGC, a major French film company, and operates France’s largest cable tv company. Generale is a subsid of water works firm Compagnie generale des eaux, one of Europe’s largest corporations, which has an annual turnover of $25 billion.

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