Caledonian delays float after Scottish TV offer

A pan-Scottish media conglomerate could be in the making, it emerged yesterday, as ITV franchise Scottish Television said it had held merger talks with Caledonian Publishing, owner of the Glasgow Herald and the Evening Times.

At least one other company is believed to be interested in the Scottish publisher, with industry speculation centring on either the Daily Mail & General Trust, Tony O'Reilly's Independent Newspapers or even the Barclay brothers, owners of the Scotsman.

The possible bids, valuing the company at about pounds 120m, mean that a planned flotation has been put on hold.

A source close to Caledonian stressed yesterday that the interest had not been solicited, and that the company had intended to proceed with the long-planned flotation. But industry sources disputed that view, suggesting that the flotation had met with resistance in the City.

Caledonian, whose chief executive Liam Kane is known, predictably, as "Citizen Kane", was bought by its managers and venture capitalists in 1992, for pounds 70m. Investment bank Fleming's owns 57 per cent of the shares.

Mr Kane worked for Rupert Murdoch, including a stint at Today, and at Sky Television.

Analysts said yesterday the proposed flotation had been poorly timed, coming on the heels of a profits warning at regional publisher Midland, the start of a Scottish cover-price war and a rights issue from Johnston Press to pay for its acquisition of Emap's regional newspapers.

STV confirmed its interest during a day of meetings with media analysts, who were told to expect the company to make its highest ever first-half profits. Gus Macdonald, STV's chairman, said: "In discussions over recent months the managements of Scottish and Caledonian have identified many areas in which the quality and profitability of their businesses could be enhanced through combining the two companies."

Analysts immediately speculated that the merger could be followed by a bid by STV for Grampian, the other ITV company north of the border.

A merger bringing together STV, Caledonian and Grampian would be technically illegal under existing cross-ownership rules. Indeed, even the new Broadcasting Bill could make it extremely difficult for STV to take on Caledonian, because of proposed ownership limits. Scottish could, however, have recourse to controversial "dead-locked" warehousing schemes.

STV's two main shareholders, Flextech and Mirror Group, are believed to have supported the discussions with Caledonian. The Mirror Group, which owns 43 per cent of the Independent, has long championed the "collegiate'' approach to newspaper publishing, and analysts suggested there could be savings if the Mirror's Daily Record in Scotland and Caledonian's titles co-operated on printing.

But DMGT would also make a logical buyer. Caledonianprints the Daily Mail in Scotland.