Comment: The Yorkshire conundrum

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The Independent Online
There is some irony in the fact that it was Greg Dyke, chief executive of Pearson Television, who argued for the sale of Pearson's 14.8 per cent stake in Yorkshire-Tyne Tees. After all, when Mr Dyke was running London Weekend Television, he engineered the purchase of a 15 per cent stake in YTT and even sat on its board.

That was a while ago, however, when he was coming at the problem from a regional ITV franchise at a time when every licence holder was buying into everyone else and lining up platforms in advance of the much-anticipated changes to the Broadcasting Act. Now he is heading what is arguably the most important part of Pearson's growing entertainment and information business, with larger fish to fry and a global appetite that has already taken it to Asia and Australia in search of TV assets. On top of that, Pearson has bid for the new Channel 5 licence, and wants to take a bigger stake than current regulations allow. By getting rid of the YTT holding, the company is now free to raise its equity stake in Channel 5 to 20 per cent - provided, of course, it wins the licence. In any case, Mr Dyke had to ask himself whether the Government was ever likely to allow the publisher of the Financial Times, 14 per cent owner of satellite broadcaster BSkyB and a would-be owner of a fifth terrestrial TV channel to own YTT outright. Far more likely, according to Pearson's own advisers, was a change in regulations to allow television companies to buy a third ITV licence holder.Certainly Granada and MAI think so. Both now have large stakes in YTT and both would dearly love to own the company. Granada, with 15 per cent, already has the licence for the north-west of England and for LWT. Getting YTT would give it more programming punch and additional advertising revenue.

MAI is no less interested. Lord Hollick, MAI's chairman, has shown how keen he is to buy into television, taking on two licence holders (Meridian and Anglia), and throwing his weight behind Pearson's bid for Channel 5.

Mr Dyke had a final reason to move now on YTT. Speculation that the Government would soon relax cross-media ownership rules has put some heat into media stocks, including YTT. Pearson is getting a hefty 23 times future earnings for its stake, a higher price than the 19 times Mirror Group paid for its 19.9 per cent stake in Scottish Television, which most analysts thought at the time was too rich. Realising a tidy £42m gives Mr Dyke some room to spend on other media assets. For MAI, the bet is riskier. If the ownership rules are relaxed, then Lord Hollick will have a fine platform from which to launch a bid. Paying 500p a share for a stock that was trading at 276p last summer and in the 400-450p range earlier this year might still look cheap if MAI gets the whole company in the end.

It is a high-risk strategy, however; the rules may not by changed sufficiently to allow a full takeover. And MAI is not alone - Granada would likely join in any battle. Sensing a bidding war, investors pushed YTT's share yet higher yesterday, to close at 538p. If they go much further, then whatever the strategic reasons for Pearson's decision to call it quits, Mr Dyke and his advisers are going to look foolish for having sold out too early.

Still, most analysts do not expect the shares to go much higher. Even in the heat of a takeover battle, Granada's Gerry Robinson and MAI's Lord Hollick are unlikely to offer silly prices. Pearson was probably right to move now, in advance of the Government's announcement next week of new ownership restrictions. Mr Dyke was probably right, too, in thinking that Pearson has more interesting things to do with its £42m than to invest in a regional television company. It is easy to get carried away in the glamourous world of media investment, however. Let's hope Mr Dyke is wise in reinvesting the proceeds.