London Weekend TV unveiled an exceptionally bullish profit forecast Tuesday in a last-ditch attempt to fight off Granada Group’s hostile takeover bid for the ITV station.
LWT said it expects to report pretax profits of T43.8 million ($ 65.2 million) for 1993, a 43% increase over the previous year, way ahead of the $ 54 million figure predicted by analysts.
LWT chairman Christopher Bland hopes to persuade shareholders to stick with the company on the basis of its strong track record and growth potential, rather than exchanging their LWT stocks for shares in Granada.
However, LWT’s defense has been undermined in recent weeks by the steady climb in Granada’s stock price, which has effectively increased the value of the paper offer from $ 900 million to $ 1.05 billion.
This could remove any need for Granada to sweeten its paper bid in order to close the deal, although it will probably now have to improve the cash alternative to bring it into line with the stock price.
Indeed, David Grimbley, an analyst with S.G. Warburg, argued that LWT’s outstanding profit forecast had dubious value as a defensive gambit, since it would push Granada’s shares even higher on anticipation of the takeover being successful.
Holding out for more
This observation contributes to a widespread perception that the LWT managers , who own about 10% of the company themselves, are fighting a less-than-vigorous defense, and may simply be holding out for a more attractive deal.
But Bland said LWT was not trying to force Granada’s hand.
“We are not seeking to squeeze a higher cash offer out of Granada,” he said. LWT had no interest in making itself takeover proof and would look at any increased offer.
Bland said the profit results showed LWT’s perf was excellent and the company had every reason to believe that would continue.
He does not expect LWT to duplicate 1993’s growth this year but says it will continue. “We’re not counting on a dramatic 1994,” he told a news conference. “But we can see plenty to keep us happy.”
The final date for Granada to improve its offer is Jan. 21, and LWT shareholders must make their decision by Feb. 4.
Granada Group, a conglomerate with computer, television rental and leisure businesses as well as television broadcasting operations, is making a paper and cash offer for LWT.