Granada to buy three stations from United
But one will have to go to meet U.K. regs
Granada is picking up Meridian, HTV and Anglia, as widely predicted, to add to the four regional ITV stations it already owns. It is paying $750 million in cash and the remainder in stock.
But it will now have to sell off one of those stations -- most likely HTV -- in order to meet U.K. TV ownership restrictions. Carlton Communications, the ITV web's other major player, is the likely buyer.
Granada is also taking over United Prods., the programming arm, and the international sales company Itel, which will be rolled into Granada's existing operations, plus United's 20% stake in Australian film company Village Roadshow.
But in a surprise move, United has clung onto its 32% stake in Channel 5. The channel's majority shareholder RTL Group, the pan-Euro broadcaster, is expected to make an offer for the stake, which is currently valued at approximately $530 million.
Retaining assets
United is retaining other media assets, including the Express newspapers and its shares in ITV breakfast station GMTV and news provider ITN. It is understood that United chief exec Clive Hollick decided to sell the ITV interests in order to head off the threat of a hostile takeover bid from Granada.
"The deal meets every objective on Granada's strategic agenda," commented Granada Media chairman Charles Allen.
Granada nailed down the acquisition after the collapse of a projected merger between United and Carlton (Daily Variety, July 21). This followed a ruling by the U.K. government that Meridian, United's largest station, would have to be sold if Carlton and United became a single company.
That condition scuppered the deal, and Hollick immediately put his stations up for sale. Granada -- which had already signaled that it would launch a hostile bid for either United or Carlton if their merger did not go through -- was left as the only real candidate to buy them.
Granada must make its own changes after the acquisition to comply with government laws. It will have to sell one of its licenses, and probably at least 5% of its stake in GMTV, so that it does not have more than 15% of the total U.K. audience.
That should enable Carlton to pick up HTV, which borders on its existing Westcountry and Central stations, as a consolation prize for missing out on the merger.
A Carlton spokesman said: "We are the natural buyer for HTV, but only at the right price." Granada Media is looking for over $500 million for HTV, but Carlton may offer its 20% stake in Meridian as a part exchange.
The ITV network commands 60% of TV advertising revenue in the U.K. Granada's takeover of the United stations gives it just over half of that, with 30.9%.
Ramping up programming
Granada is already ITV's creative powerhouse, supplying 46% of the web's programming, but the addition of United Prods. will lift it just over 50%.
Granada's Allen envisaged a close partnership between ITV's two remaining big players. He said: "Granada and Carlton can achieve many of the benefits of a unified ITV in advance of future legislation."
The two companies already share ownership of ONdigital, the second largest U.K. satcaster, and are planning to consolidate the partnership with Internet ventures such as itv.co.uk.
Granada will issue 213.7 million new shares to United shareholders to pay for $1.88 billion of the deal, satisfying the remainder in cash.
This payment structure surprised some analysts, since Granada has $1.95 billion in war chest funds available after floating 20% of its stock in early July. The bulk of that cash remains in Granada's pocket, and with the sale of HTV still to come, puts the company in a strong position for further expansion, most likely in the international arena.
