Carlton steps back from MAI hostile bid

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The Independent Online
Carlton Communications, Michael Green's media group, yesterday abandoned plans to raise pounds 1.8bn of bank debt, following an early morning decline in its share price and amid concern among its leading shareholders that it might intervene in the merger between MAI and United News & Media.

The banking consortium, headed by Hambros Bank, was told first thing yesterday morning that Carlton no longer needed to raise pounds 1.8bn by next Monday, which had been the intention since last weekend. The bank is believed to have been told that it will not receive a "kill" fee.

The decision to abandon the financing plan was followed at mid-day by a statement by Carlton to the stock market saying that it had no intention "in the present circumstances" of spoiling the MAI/United merger.

MAI shares, which reached a high of 466p in morning trading, slumped to 419p by the close, wrong-footing many investors. It is believed Carlton has launched an internal inquiry into how news of the bank debt-raising exercise had leaked to the Independent, which exclusively reported the details yesterday.

Some of the company's leading shareholders expressed relief at the decision to abandon the bid. One said: "Michael Green would have had some explaining to do as to why he was intending to jump into the MAI/United situation at this stage. He needs to give a clear indication of the group's strategic direction. Various parts of the business are not really going anywhere."

Said another institutional investor: "The market is telling us that Green will have to make a very good case for whatever he does now."

MAI's shares rose strongly in frenzied early-morning trading after news of Carlton's bank debt-raising exercise and its approach to US investment bank Merrill Lynch to help with a bid. At their high point the shares were up 30p, nearly 8 per cent, making MAI the highest riser of the morning. Carlton's statement led to a reversal of part of the gains in MAI and other media companies that had been buoyed by merger talk.

Carlton's shares started weakly, suggesting the City would not have welcomed a Carlton strike at this stage. It recovered to close at 1013p, up 7p on the day.

The statement came after discussions initiated by the City's panel on takeovers and mergers. Carlton was keen to point out that it did not normally comment on market rumours, which have been sweeping the market since the merger plan was announced two weeks ago, and which have sent shares across the sector rocketing. However, the panel on takeovers and mergers had requested that Carlton clarifiedits intentions, the company said in a brief statement. "In the light of this, Carlton wishes to make clear that, in the present circumstances, it does not intend to intervene in the proposed merger between United News & Media and MAI."

Senior sources at Carlton confirmed yesterday that an intervention in the merger had been contemplated. But said one source: "There is no point moving and then finding that we have halved our share price. That is no good for shareholders. It was time for sanity to hit. Yes, it would have been exciting and it was very possible to do it and the banks would shovel money to us without trouble."

Analysts said Carlton, which is said to be still considering retaining Merrill Lynch as an adviser, might now turn its attention to other targets. Among possible candidates were ITV companies HTV and Scottish Television, as well as the Mirror Group, which owns 43 per cent of the Independent.

"Green sees himself as a mover and a shaker," said one media analyst. "But so far, he has lagging behind the competition."

Competitors to Carlton, including Granada and MAI, have already moved in anticipation of liberalised rules on cross-media ownership and relaxation of the limits on ITV licences promised in the new Broadcasting Bill.

MAI announced plans to merge with United early this month, while Granada last week took its stake in Yorkshire-Tyne Tees to 25 per cent.

Carlton has seen its advertising revenues slip in January and February, according to industry sources, and is believed keen to expand its domestic television interests. But high prices in the ITV sector, fuelled by bid speculation, have made it difficult to warrant a bid. Carlton is known to be frustrated that its stock trades at a modest price-earnings premium compared with other media companies, due to its mix of television, film and video businesses.

Some analysts predicted that Mr Green himself could be exposed to a bid if he fails to convince the market he can derive benefits from the liberalisation of the media sector.