Granada stalked Pearson with offer worth pounds 5bn

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The Independent Online
Granada spent seven months last year stalking Pearson, the media and financial services company, but abandoned a potential bid when it emerged that the Cowdray family would not accept an offer of up to pounds 9 a share.

It is believed that Granada, which last week won a two-month battle for Forte, the hotels and restaurants concern, was preparing a break-up bid to secure Pearson's range of media assets, which include Thames Television, the independent television production company, and Grundy Worldwide, makers of the soap, Neighbours.

At pounds 9 a share, Pearson would be worth just over pounds 5bn. The Cowdray family, with Lazard Brothers, the merchant bank controlled by Pearson, whose chairman is Lord Blakenham, own 21 per cent of the group, making a hostile bid hard to win.

Neither Granada nor Pearson would comment. A Granada source said the management team was tied up in preparations for the takeover of Forte, and deep in negotiations to sell parts of the hotels empire.

Meanwhile, Marriott, the US hotels group mentioned as a possible buyer for some of the Forte properties, yesterday said it had turned down an offer from Granada for an asset swap involving Forte's Meridien and Exclusive chains.

Granada's interest in Pearson has long been rumoured in the market. But analysts said most potential bidders would be put off by the family stake.

"This is a very difficult company to take over, as others have already discovered," a Pearson insider said. "Even Rupert Murdoch couldn't do it with 20 per cent in his pocket."

Mr Murdoch made a run at the company in the late 1980s, eventually building a 20 per cent stake he later sold at a profit.

Analysts said a bid would have made sense for Granada, but only at a maximium price of pounds 9, which Henderson Crosthwaite has calculated to be the maximum break-up value of the group. Pearson shares closed at 650p last night, toward the high end of analysts' trading ranges. It is believed the share price already includes a marginal bid premium.

Granada's interest came as little surprise to media analysts, who pointed out that Pearson has long had a reputation for sleepy management, and has only recently moved to reduce back-office costs following a two-year strategic shift from luxury goods and services to media.

"Some of what they are doing now is clearly aimed at heading off a potential bid," said one leading media analyst.

There has also been speculation that Pearson and MAI, the financial services and media group headed by Lord Hollick, could merge their financial operations, in a move to preempt any break-up bid of either company. The two are partners in the new Channel 5 service.

Pearson called in analysts in December to paint a downbeat picture of current trading. City houses consequently lowered their estimates for 1995 to about pounds 240m, not counting a one-off gain of pounds 466m from the sale of Pearson's 14 per cent stake in BSkyB, the satellite broadcaster. It also announced it would incur pounds 32m in additional restructuring costs, following changes to back-office systems.

"They spent a fortune on management consultants to cut a few costs," said one analyst. "Most companies would have taken these charges long ago."

Analysts have been generally supportive of management changes, announced last week. The company's three main lines of business will report to three senior executives. David Bell, former chief executive of the Financial Times Group, will be responsible for information. Greg Dyke, former head of LWT and chief executive of Pearson Television, will have primary responsibility at board level for films and entertainment. David Veit, formerly assistant managing director, will handle other entertainment ventures.