Granada looking at SMG offer

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GRANADA, THE broadcaster and leisure group, could bid for Scottish Media Group as soon as late September, people familiar with the matter said yesterday.

In March, when Granada bought Mirror Group's 18.6 per cent interest in Scottish Media for pounds 110m, the ITV broadcaster said it had "no [current] intention" to increase its stake. However, Granada reserved the right to do so should another party launch a bid or buy a 15 per cent holding.

Though the Stock Exchange usually interprets such declarations as lasting for a year, analysts say that Granada could likely move either to buy out SMG or to up its stake to 29.9 per cent, the maximum permitted without occasioning a full bid, after six months, that is, in late September.

"The key to this from Granada's point of view is Flextech's 18.6 per cent stake [in SMG]," said someone close to the situation. "If [Granada] were at 29.9 per cent it would make it very difficult - and expensive - for someone else to come in."

Granada could also swap its 50.5 per cent interest in Granada Sky Broadcasting for all or part of the Flextech's SMG interest, though a spokesman denied any intention to do so. Current competition rules limit broadcasters to a maximum 15 per cent of total television viewership and 25 per cent of television advertising sales. Were Granada to buy Scottish it would be comfortably within the viewership strictures and narrowly within the advertising sales limit.

Granada followed a similar stalking strategy when it bought out YTV during 1996-97.