ITV hostilities heat up

The tussle for power within the ITV network turned a good deal rougher Monday, when Granada Group announced a hostile takeover bid for London Weekend TV.

Granada, the leisure giant that runs the ITV station for northwest England, already owns 17.5% of London Weekend TV. Its all-stock offer for the remaining stake values the London ITV company at T600 million ($ 888 million).

But after discussions with Granada over the weekend, the London Weekend TV board decided not to recommend the deal to its shareholders. The offer price represents a 0.8% discount on the open market value of London Weekend TV stock last Friday.

A disdainful London Weekend TV said the offer “does not reflect the past performance and future prospects of the company.”

This is the second takeover bid since Nov. 24, when the Britishgovernment announced its plans to relax the ownership rules for the ITV network, Britain’s main commercial web, comprising 15 regional stations.

Carlton Communications was first out of the blocks last week with its offer to buy Central Independent TV, bringing together the two largest ITV stations with 30% of the total ITV advertising market (Daily Variety, Nov. 30). Granada TV and London Weekend TV are not far behind in size — together they broadcast to 16 million viewers and account for about 23% of ITV’s national ad revenues.

Moreover, Granada is already ITV’s biggest producer, supplying about a quarter of the network schedule, including the U.K.’s top-rated show, the thrice-weekly soap “Coronation Street.” London Weekend TV supplies about 15% of all ITV’s programs, dominating the weekend schedule with its glitzy light entertainment and drama shows. Together the two companies would be a formidable force in the ITV production business.

The Granada bid for London Weekend TV is only the second hostile takeover attempt in the history of the ITV network. In 1986, Carlton’s attempt to buy Thames TV was blocked by ITV’s regulators.

In 1994, however, the regulators lose their long-standing power to prevent hostile takeovers. By that time, the British parliament will almost certainly have rubber-stamped the latest changes in ITV ownership rules, allowing one company to control any two ITV stations other than the two London franchises.

Offer iffy

This will free Granada to snap up London Weekend TV in the new year, if it can persuade the channel’s other shareholders to sell. On the face of it, the offer price looks unappetizing, but Granada chief exec Gerry Robinson argues otherwise. He points out that the offer, equivalent to 580.5 pence ($ 8.59) a share, represents a premium of 55% over London Weekend TV’s share price in June, when Granada first bought a stake and triggered speculation about a takeover bid.

Swap suggested

Robinson hopes to persuade London Weekend TV shareholders — which include about 50 senior station managers who together control about 10% of the stock — to swap for newly issued Granada shares. There is also a cash alternative of $ 7 .81 a share.

But analysts believe Granada eventually may need to sweeten its bid, perhaps offering up to T7 a share. Many observers believe Granada’s quick and cheap strike was designed to prevent London Weekend TV from protecting itself by agreeing to a merger with Yorkshire Tyne Tees TV, in which it holds a 14% stake.

London Weekend TV could still make a bid for YTT-TV, but now it will require advance permission from its shareholders to do so.

Faced with such obstacles, the institutional shareholders that control over 70% of London Weekend TV stock may not be eager to pursue the YTT-TV option — especially since YTT-TV is so deep in financial trouble that even London Weekend TV’s high-caliber management might have trouble turning it around.

London Weekend TV chairman Christopher Bland stands to make about $ 16.5 million personally on his stock if the Granada bid succeeds at the current offer price. But he said Monday that London Weekend TV would have a strong future if it remained a stand-alone company.

On Monday, Granada Group announced pretax profits of T176 million ($ 260 million) for the year to Oct. 2, up 53%. Sales grew 21% to T1.6 billion ($ 2.4 billion). Granada TV contributed operating profits of T43 million ($ 64 million) , a 30% increase despite sales growing only 8% to T248 million ($ 367 million).

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