Granada turns its back on bids as it looks to a year of consolidation

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The Independent Online
Granada Group has ruled out any big acquisitions during the next year. The company indicated yesterday it would embark on a period of consolidation after two years that have seen it swallow Forte for pounds 3.8bn and make the pounds 711m purchase of Yorkshire-Tyne Tees Television. Cathy Newman reports.

Gerry Robinson, chairman of Granada, said that after two substantial additions to the business within the last two years, there were no further bids on the immediate horizon.

"You make an acquisition and then you make it pay. It's very unlikely you'll see a major acquisition from us in the next year," he said.

In the year to the end of September Granada improved profits at Forte, which it bought at the beginning of last year, by pounds 124m - more than its original target of pounds 100m.

City analysts said the market was impressed by a 35 per cent increase in profit before tax and exceptional items to pounds 650m. Granada's shares closed up 43p at 843p.

Paul Slattery, leisure analyst at Kleinwort Benson, said he liked what he had seen in Granada, and was not surprised that the emphasis was now on organic growth. "They've still got quite a bit of reshaping to do with the acquisitions and disposals."

During the period, Granada has boosted its position in television by buying YTTV and setting up British Digital Broadcasting (BDB), a joint venture with Carlton Communications to run digital terrestrial television services.

However, Mr Robinson said there would not be any benefit at present in spinning off Granada's television interests. "We're in two mainstream businesses, but I do not see you'd enhance value by separating them," he said. "Demerger remains an option, but not one we see anything happening on in the short to medium term."

Mr Robinson confirmed that he may have to relinquish his position on the board of BDB at the request of the European Commission. The competition authorities have been concerned that Mr Robinson is chairman of both Granada and BSkyB - which provides programming for BDB - as well as a director of BDB.

BSkyB has a seven-year contract to provide programmes to BDB, but Mr Robinson said yesterday that may have to be reduced to five years.

"It's hard to tie that down," he said. "It's possible that will be reduced to five years. It might appear as a regulatory issue." Granada said its share of the start-up costs of BDB would be pounds 75m.

Granada has made pounds 1.5bn from disposals since it bought the Forte hotels. However, there was little news yesterday of further sell-offs.

Analysts speculated that other businesses to be sold off relatively soon could include the French motorway service stations, the Grosvenor House Hotel in London, and Granada's 68 per cent shareholding in the Savoy Hotel. Granada said it was optimistic about selling the French motorway services soon.

The company said pounds 18m would be knocked off profits in its rental division each year because of the increase in insurance premium tax to 17.5 per cent.