Carlton And United Welcome Merger Clearance
Both Carlton and United have issued statements welcoming this morning’s verdict from the DTI which clears the way for a merger between the two ITV groups. But all eyes are on Granada as it decides which of its rivals it will mount a bid for.
Carlton and United are carefully studying the report issued by the Department of Trade and Industry to fully understand the implications of a relaxation of regulatory restrictions and have said they will make a further announcement in due course. The decision, however, now lies in Granada’s hands: despite its previous intention to mount a bid for one of its rivals, there is speculation today that the companies will come to an three-way agreement between themselves.
A decision, expected early next week, will end eight months of discussions regarding the future of the television industry in the UK. The prospect of three giant ITV franchisees preparing for takeover battle has held the attention of everyone involved in the industry.
The saga began in November last year, when it was rumoured that talks were in progress between Carlton and United News & Media (UNM) regarding joint ventures such as a Premier League football rights bid and the possibility of UNM taking a stake in ONdigital. The possibility of a full merger was also thought to be under discussion (see Carlton And UNM Collaboration Talks Reported).
A few days later, the speculation was confirmed as a £7.8bn merger plan was announced by the two companies. UNM chief executive, Clive Hollick, said “The choice is straightforward- we can wait for the future to arrive or start to shape it today.” (see Carlton/UNM Merged Group Plans For The Future). The announcement heralded the creation of a major rival to Granada.
The new year brought a counter-attack from Granada, which proposed the acquisition of either one of the two companies (see Granada Poised To Bid For Rivals) and made a formal submission to the Office of Fair Trading to this effect. A new topic for speculation was: which of the two companies was Granada most likely to go for? (see Market Backs Carlton As Most Likely Target For Granada)
Carlton and UNM were showing a brave face. “”The Carlton/United merger is strategically compelling and creates significant shareholder value.” said Clive Hollick, “Granada’s statement today contains no specific proposals and should be ignored.” (see Carlton And United Respond To Granada Decision)
The ITC invited public comment on the Carlton/UNM merger in January (see ITC Seeks Views On Carlton/UNM Merger) and on the Granada proposal in April (see ITC Invites Views On Granada’s Proposed Acquisition Of United). Reporting back on the former, the ITC conceded that ITV consolidation was inevitable and that some modification of the rules was needed. However, it said that there was no “convincing case” for the change in law this proposal would warrant (see United/Carlton Merger Requires Change In Legislation, Says ITC). An issues paper along similar lines was published on Granada in May (see ITC Publishes Granada Mergers Issues Paper), but the following month the ITC announced that all three possible mergers passed its public interest test (see ITC Says Proposed Mergers Pass Public Interest Test).
Meanwhile, the Carlton/UNM proposal was referred by the Department of Trade and Industry to the Competition Commission (see Carlton-United Merger Deal Referred To Competition Commission). Secretary of State for Trade and Industry Stephen Byers said on announcing this decision, “The parties to the merger are highly influential players in ITV. This is a very important area in which we all have an interest both for information and entertainment.” Granada’s proposal was referred by the end of the month and a date of 16th May was set for the reports on both (see Granada Referred To The Competition Commission).
April came and the report date was put back to 16th June (see Competition Commission Extends Deadline To Report On Carlton/UNM). By the end of the month an issues letter was sent to the companies involved (see
As the waiting game continued for today’s announcement, UNM announced in its half year results that it had enjoyed an unexpected rise in advertising revenues (see United Reports Increased Revenue As It Awaits Regulatory Outcome). Overall its share price has also risen from £7.89 on the first day’s trading of 2000 to £8.98 at close yesterday.
The merger proposals have not harmed Carlton’s position in the market either. Since the first day’s trading of 2000, the price has risen from £6.03 to £8.26 at yesterday’s close of trading, which could mean the original deal with UNM will need altering if it goes ahead to take the revised values into account.
Granada, meanwhile, has retained a fairly steady share price, but has been building its strength to prepare for battle. New appointments to its board were announced last month (see Granada Makes Board Appointments Ahead Of Carlton/UNM Decision) and when the flotation of its media arm this month (see Granada Media Begins Conditional Trading) was successful (see Granada Media Begins Conditional Trading), it was thought that Granada was creating a war chest in preparation for its hostile bid.
With the decision of the Competition Commission made, it will be up to Granada to make a move to prevent Carlton and UNM going ahead with their original deal. But will UNM’s loyalty to its original partner be tested if it has the chance to retain Meridian in a deal with Granada? It will be up to shareholders to decide.
Current share prices for the three groups are as follows: Carlton Communications has dropped 37˝p at 788˝p; United is up 14p at 912p and Granada is up 17p at 634p.
Carlton Communications: 020 7663 6363 United News & Media: 020 7921 5000 Granada: 020 7620 1620