Australian TV firm costs Pearson £175m

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Entertainment and information conglomerate Pearson is paying A$279m (£175m) for Grundy Worldwide, the Australian television production company that makes the popular soap opera, Neighbours.

The purchase marks the company's first big move into television production since it bought Thames Television in 1993. It is also the maiden acquisition for Greg Dyke, the former LWT head, who was was named chairman of Pearson Television earlier this year.

Grundy has operations in 14 countries and a staff of 300, producing soap operas and games shows such as Going for Gold and How Do They Do That?

Analysts said the price was full but fair, and confirmed the company's view that the acquisition would be earnings-enhancing from the first year. Grundy made £12m in the six months to December.

Mr Dyke clinched the deal himself last week, flying to New York to meet Reg Grundy, the owner of 85 per cent of Grundy Worldwide. Pearson first approached Grundy five weeks ago, as the Australian company was preparing for a stock market flotation. Mr Grundy will remain with the company as a consultant.

"Strategically, this is a good move for Pearson," Christine Munro, media analyst at Hoare Govett, said. "It follows from what the company has said it would do on the programming side, and they have an excellent programme man to run it."

Pearson has a 10 per cent stake in TVB, a Hong Kong-based broadcaster, a 14 per cent holding in Yorkshire Tyne & Tees, 100 per cent of Thames Television, 15 per cent of BSkyB and joint ventures with the BBC. Mr Dyke has said success in television comes from control over programming rights and libraries.

Grundy Worldwide has patented a profitable and popular style of television programming, relying on simple formats and storylines, slightly altered country to country for local tastes. Its Australian soap opera, the Restless Years, is also produced in Germany and in Holland, using identical formats but with small changes in the script. Similarly, Going for Gold is broadcast in French.

"This kind of high-volume, low-cost programming wins big ratings," Mr Dyke said. Pearson believes two large new markets, the "emerging" nations of Asia and Latin America and the newly-commercialised countries of eastern Europe, will produce large demand for television programming.

"We need to be able to supply programming for all these new markets," a company spokesman said.