Carlton in pounds 758m swoop on Central: Surprise offer is expected to be the first of a wave of television company takeovers

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MICHAEL Green's Carlton Communications yesterday launched a surprise pounds 758m bid for Central Independent Television, the first in an expected wave of takeovers of television companies following the Government's decision to liberalise ownership in the industry.

If successful, the merger will see Carlton control more than 30 per cent of all ITV advertising, and more than 36 per cent of ITN.

Carlton, which is offering the equivalent of pounds 26 a share, has the backing of Central's board. It already owns 20 per cent of Central, and has the support of publisher DC Thomson, which holds another 19.3 per cent of the group.

If the merger goes through, the media company, which owns 90 per cent of Carlton Television, the holder of the London weekday franchise, will pay pounds 624m in cash and shares for the 80 per cent of Central it does not already own.

However, the bid is conditional on the passing of legislation to allow large independent television companies to buy each other.

Last week the Government said it intended to permit up to two 'large' independent television franchises to be held by the same company, but it has not yet introduced the necessary statutory orders in Parliament.

The move irritated some MPs who said Carlton's bid was premature. Marjorie Mowlam, the Shadow Heritage Secretary, who says she is worried about the impact on regional programming, pledged to oppose the rule changes, which she said 'cannot be guaranteed'.

Leslie Hill, Central's chairman and chief executive, said time was of the essence since from 1 January European companies would also be able to bid for UK franchise holders.

Central had looked at a number of options, including bidding for a second licence holder itself, he said. But 'this link-up (with Carlton) makes for such a powerful group, and we felt we had received a price which we felt we had to recommend to our shareholders'.

The offer is also subject to the bid not being recommended for referral to the Monopolies and Mergers Commission by the Office of Fair Trading, which has launched an investigation into it. The concentration of airtime selling power that the combined group would present is a likely source of concern.

Carlton and Central have made it clear that, for the time being at least, their airtime will be sold separately. This is because Independent Television Commission rules prevent any single company controlling more than 25 per cent of sales.

But the two groups have made no secret of the fact they would like to see the rule, due to be reviewed in the new year, abandoned.

Advertisers said they accepted that the 15-company system was an anachronism and needed reform. But they are worried about over- powerful media concentrations.

Adrian Birchall, chairman and chief executive of The Media Centre and a key figure in the Institute of Practitioners in Advertising, said: 'We are concerned about too much concentration in advertising sales before the competition really starts up. Channel 5 doesn't exist, and it looks as if advertising on the BBC won't happen.'

Central sells its airtime through TSMS, an agency set up to serve Anglia and Ulster TV as well. If the rule is relaxed then Central's airtime will be most probably handled by Carlton's sales force.

The merger is expected to produce savings of more than pounds 15m. Yesterday Carlton's figures for the year ended 30 September showed turnover rose 56 per cent to pounds 1bn and pre-tax profits were up 26 per cent to pounds 126m. Earnings rose 26 per cent to 42p and the final dividend was 10 per cent higher at 11.3p.

Market Report, View from City Road, page 30

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