MAI merger set to go through

The City was betting last night that the proposed merger between MAI and United News & Media would be passed overwhelmingly, on the eve of the deal's first close today.

Shares in MAI, the nominal takeover target under the merger's structure, closed last night at 411p, about even with the all-shares offer from United at yesterday's price of 644p.

Lord Hollick, MAI's chief executive, last night wound up a series of institutional briefings aimed at convincing a sceptical City of the merits of the proposed merger, which has been characterised as "defensive" by most observers.

"There are no great synergies to be had here," said one analyst. "But in the absence of any other bid, it will go through."

Hopes that another media company would enter the fray have faded, particularly since last week's dramatic statement from Carlton Communications, Michael Green's TV and video services company, that it would not intervene.

The combined companies, which will have extensive television, magazine and newspaper interests, are expected to post pre-tax profits next year of between pounds 290m and pounds 340m, acccording to analysts. The unusually broad range of forecasts is a reflection of City doubts about the advantages of the merger. Last year, there were pro-forma operating profits of about pounds 265m.

Analysts at Hoare Govett are among the more optimistic about the proposed merger, which would group MAI's two television licences, Anglia Television and Meridian, along with United's Daily Express, the Sunday Express, the Star and magazines and regional newspapers.

They point to Lord Hollick's track record at building profits at MAI, and assume his role as chief executive of the merged companies will bring improvements to United's range of businesses. The chairman of the new company will be Lord Stevens of United.

But other analysts question whether the combination of television and newspapers will generate any additional value. "This is really about backing management rather than analysing value," Louise Barton, analyst at Henderson Crosthwaite, said. "We are recommending the merger, but don't see any great synergies." She is also concerned about the likely losses the group will clock up following the launch of the new Channel 5 service, in which MAI has a 30 per cent stake.

The merger marks the first attempt to marry independent television and national newspapers, following the tabling of the new Broadcasting Bill. Anlaysts expect further activity in the sector.

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