Carlton's surprise pounds 760m bid for Central Television, agreed ahead of next month's House of Commons vote on allowing large ITV companies to take over one another, along with suggestions of interest by foreign-owned media companies, has provided the catalyst for Granada's search for an agreed bid.
Advisers to Granada are stressing that a move on LWT, currently valued on the stock market at more than pounds 600m, is only one of a number of options open to the company, including doing nothing, but LWT is the preferred choice.
Gerry Robinson, chief executive, is keen to agree terms with Sir Christopher Bland, LWT's chairman, but his advisers say he would not shirk from a hostile takeover rather than over-pay to the disadvantage of Granada shareholders.
LWT shares have jumped by 50 per cent to 585p since Granada bought an initial 14.9 per cent stake, since increased to 20 per cent, in a dawn raid last June.
The current LWT share price, expressed as a multiple of recent earnings, represents a 20 per cent premium over the price Carlton agreed for Central Television. On this basis it is unlikely that Granada would be willing to pay significantly more than the current stock market price for LWT.
Granada's interest in LWT has also been stimulated by speculation that LWT may seek to mop up Yorkshire-Tyne Tees, currently worth pounds 90m on the stock market, in which it already has a 14 per cent holding, bought after talks between Granada and Yorkshire fell through.
Such a move would prevent Granada from making a move on LWT as the Government's proposed new rules on the ownership of ITV companies will forbid a company from holding more than two franchises. To buy Yorkshire, LWT would have to arrange to shed Tyne Tees.
'There is only one logical move left in the independent television industry, which is for Granada to merge with LWT,' a Granada adviser said. 'It's all about advertising bums on seats - the two together cover 16 million people or 23 per cent of the ITV advertising market, a little behind Carlton and Central. No other variation could deliver this.'
Since Mr Robinson joined Granada from Compass Group, the contract caterers, in 1991, he has been criticised for being slow to appreciate the potential for Granada's television interests and is having to move quickly to catch up.
On Wednesday Granada is expected to announce an increase in pre-tax profits, from pounds 130.2m to between pounds 160m and pounds 170m in the year to the end of September. Its highly rated shares, boosted by a stake in BSkyB that analysts value at pounds 500m, are near an all-time high and are ideal takeover currency.
Granada has agreed to operate Burger King restaurants in its nationwide network of motorway service stations. Thirteen are planned to open by early next year. Last month Compass Group bought a franchise to introduce Burger King, owned by Grand Metropolitan, to 16 large British Rail stations.Reuse content