Thorn Enters Thames Bid At ITV Auction

The $4 billion ITV auction sweeps heated up last week with news that giant music and electronics group Thorn EMI has bid for Thames Television, the U.K.’s largest commercial broadcaster.

Thames shareholders Thorn and industrial services group BET – each of which owned 28% – jointly announced plans to sell their stakes in the London weekday franchise holder 10 months ago. No serious bids have been forthcoming.

Thorn EMI has bid 250 pence (about $4.98) in cash plus a deferred payment of up to 50 pence (about a dollar) per share for BET’s stake, which values the group at between &pounds;124 million ($246 million) and &pounds;148 million ($294 million). Under stock exchange rules, it is now required to bid for the whole group. Last year Thames had estimated gross revenues of &pounds;365 million ($726 million), making it the largest company of the ITV network.

Also last week, facilities group Carlton Communications, which tried to take over Thames TV five years ago but was barred by the broadcasting regulatory body, said it would set up its own rival bid for a major ITV franchise.

Carlton appointed Nigel Walmsley, managing director of London pop service Capital Radio, to spearhead its franchise plans. “Carlton has made a very shrewd choice. Walmsley may not be experienced in tv, but he’s got a fantastic knowledge of London demographics,” said one media analyst, adding the new appointment supported the widely-held belief that Carlton would bid for Thames’s London weekday franchise.

A spokesman for Thames said the continuing uncertainty over the BET/Thorn shareholding was damaging Thames’ franchise renewal chances. BET, suffering a cash crunch, has made no secret of its wish to get out of broadcasting. With no other suitor on the horizon, Thorn has clearly concluded there was no option but to bid for the BET stake.

Bids for new ten-year ITV franchises (to run from 1993) have to be submitted within the next three months and winners will be announced at the end of the year. Rules of the franchise bid state that there can be no change in shareholdings once bids are submitted.

“Thorn has made a simple investment decision. When it put its shares on the market in April they were worth 550 pence ($10.95). Now they are down to half that amount. They have decided it makes better sense to back Thames in order to get the share price back up,” said Peter Hillier of securities firm Barclays de Zoete Wedd.

Another analyst said the move could be interpreted as Thorn trying “to make the best of a bad job.” He added that with a market capitalization of more than &pounds;2 billion ($4 billion), a Thorn-backed Thames must be in a strong position to regain its franchise in the upcoming auction.

Independent directors at Thames, while welcoming the purchase of BET’s stake, are advising shareholders not to accept Thorn’s offer. They want to keep the company’s stock market listing and make sure Thames is owned by more than one shareholder. Thames also contends the 300-pence (about $5.97) offer values the company at less that its assets. A source at Thames said Thorn had done extremely well from the deal, noting that BET had been “desperate” to sell.

Thames will face keen competition for its London weekday franchise. Hillier noted that London weekday franchise is the “plum” ITV license that takes the largest share of ad revenue.

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