Powerful institutional investors at Carlton and Granada are calling for more radical cost cutting at the merged ITV plc, just days after forcing the resignation of Michael Green as chairman designate of the company (see Green Relinquishes Role As ITV Chairman Designate).
It is understood that shareholders, led by Fidelity and Standard Life, believe that a merged ITV can deliver annual savings of around £100 million, which is almost double the £55 million figure agreed by Carlton and Granada during their merger negotiations.
Charles Allen has vowed to cut £35 million in costs by minimising duplication in back office functions and production. He also plans to save a further £20 million by combining Carlton and Granada’s advertising sales operations.
However, a report in the Financial Times suggests that investors are seeking more substantial savings after persuading Granada to support their calls for an independent non-executive chairman to replace Green at ITV plc.
The city institutions believe further cut-backs are possible in television production and regional programming. One leading investor told the paper: “The shareholders believe that without a substantial improvement in the proposed cost savings, ITV’s prospects could be in doubt.”
Earlier this year former Channel Five chief executive, David Elstein, also suggested that the merger of Carlton and Granada could produce more than £100 million of savings for the combined ITV company (see Granada Dismisses Elstein’s Merger Savings Calculations).
However, this figure was dismissed by Granada, the larger ITV broadcaster, which argued that it already produced the most cost effective programming in terms of advertising impacts. ITV officials also claim that cuts in regional output could undermine the broadcaster’s public service obligations.
Meanwhile, concerns are growing that the dispute between shareholders and ITV’s management designate could flare up again over the the terms of Allen’s pay contract with the newly merged company (see Allen Deal Could Spark Fresh Shareholder Dispute).
