Business View: ITV's much-misunderstood merger has turned out to be a takeover

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The Independent Online

I must declare an interest. Michael Green once took me to breakfast at Claridge's as his PR adviser was concerned the two of us were not getting on. Before the waiter had even poured a cup of coffee, the Carlton chairman turned to me and said: "I've worked you out, Jason. You're one of those Jew-hating Jews."

So you won't be surprised that I didn't shed too many tears when Mr Green lost his brief battle with the giant US fund manager Fidelity over whether he would be executive chairman of ITV, the group being created from the merger of Carlton and Granada. As soon as Fidelity had mustered up a posse of other shareholders, the game was up, despite bleatings from non-executives who should have known better. After all, who owns the company? The shareholders or the management?

However, it could all have been avoided. When Anthony Bolton, the nor- mally mild-mannered Fidelity fund manager, met with Sir Brian Pitman and Sir George Russell, the senior non-executives at Carlton and Granada respectively, they appeared to misunderstand each other. What Mr Bolton has told me is that he told them the management structure they were planning for ITV was unacceptable. What they understood was that the management was unacceptable.

Mr Bolton's worry was that, with Mr Green as executive chairman and Charles Allen as chief executive, you had two bosses. And two bosses with a record of not quite seeing eye to eye. He wanted one boss - the chief executive. And as Mr Green was on the slate as executive chairman, he had to go. (As an aside, I asked whether if Mr Allen had been executive chairman, he would have been given the push. The answer was: "Yes".)

Mr Bolton also wanted a new, independent non-executive chairman, to keep a close eye on Mr Allen. In other words, the former Granada boss could not feel too comfortable in his job, either.

The others feeling fragile must be the non-executives. Etienne de Villiers of EuroDisney and John McGrath of Boots both came out publicly in support of Mr Green, then retreated under pressure. Mr Bolton is willing to forgive and forget, though I hear that M. de Villiers isn't and may not make it on to the ITV board.

Two longer-term issues come out of this. One is whether the effect of the Higgs report on the role of senior non-executive directors is going to improve communication between companies and their shareholders, or make it worse. In this case the communication lines failed, and you had two very experienced directors. This structure needs work.

The second is that this episode has put a final nail in the coffin of the concept of a "merger of equals". This structure, where two companies come together as partners and the jobs are divvied up equally, appears good in principle. It is much favoured by merchant banks trying to get agreement at meetings lasting into the early hours of the morning.

But it is a fudge. There are no mergers in the real world. Only takeovers.

The net effect of the ousting of Mr Green is that this deal is turning into a nil-premium takeover of Carlton by Granada. If this was the deal originally on the table, I suspect Carlton would not have accepted it. There are those who say this was a Machiavellian plot hatched by Mr Bolton and Mr Allen. I thinkMr Allen merely saw which way the wind was blowing and put himself in the best position to benefit.

Lazy Google having a giggle

Last March, when asked about an imminent Google flotation, the search engine's co-founder, Sergey Brin, said: "That's a lot of work and I'm lazy. It requires filling out a lot of forms." Presumably Mr Brin has filled out the forms now, but he and his partner Larry Page have yet to find an investment bank to do the float.

Letting slip that they are thinking of a massive online share auction is one way of getting the hungry hounds of Wall Street to cut their fees. But the tactic, championed by veteran Silicon Valley banker Bill Hambrecht, has never been used on this scale before. The two companies floated via online auction so far have a combined value of $365m, just 2.5 per cent of the expected worth of Google.

But if Messrs Brin and Page really want to let the new economy stuff Wall Street, they should go the whole hog - and sell Google shares on eBay.

j.nisse@independent.co.uk

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