London Weekend TV, scrambling to defend itself against the hostile takeover bid launched last week by Granada Group, is discussing a possible merger with fellow ITV station Yorkshire-Tyne Tees TV, it was confirmed Tuesday.
Yorkshire issued a statement saying that it had received “a preliminary approach from LWT, which may or may not lead to an offer.” LWT refused to comment.
Defense is best offense
Reports suggest that LWT is exploring a complex defense strategy that involves buying YTT-TV, in which it already holds a 14% stake, then immediately selling the Tyne Tees half of the company to Anglia TV, another ITV station.
The newly liberalized ITV ownership rules permit one company to control two regional ITV broadcasting licenses (except the two London licenses).
By buying YTT-TV, LWT would make itself safe from takeover by Granada. But YTT-TV already owns two licenses, so LWT would have to dispose of Tyne Tees to make the takeover legal.
If Anglia picked up Tyne Tees, it also would gain protection against hostile predators.
The four companies then would be poised for a mega-merger if, as expected, the government relaxes further the ownership rules some time in the next few years.
LWT will officially outline its strategy in its defense document, due to be published on Monday. Chairman Christopher Bland says that he wants LWT to remain a “pure” TV company, rather than becoming part of Granada’s diversified leisure interests.
However, he will have to convince shareholders that his vision for LWT’s future offers better value than Granada’s T600 million ($ 900 million) bid.
His task is complicated by the fact that Granada already owns 17.5% of LWT.
Most analysts believe that LWT management will eventually have no choice but to accept a sweetened bid from Granada.
One compelling reason for this view is the fact that YTT-TV is deep in financial crisis, and therefore a rather unattractive investment.
YTT-TV postponed the announcement of its annual results, due Tuesday, until the end of January. It issued a statement that losses would not exceed T9.5 million ($ 14.5 million).