MGN takes 15% of Scottish TV

MIRROR GROUP Newspapers yesterday underlined its determination to move into broadcasting when it scooped up a 14.9 per cent stake in Scottish Television, the company famous for producing Taggart and Dr Finlay's Casebook.

The City interpreted MGN's purchase as an indication that it will launch a full bid for the company when, as is widely expected, the rules preventing newspapers owning a controlling stake in television companies are abolished.

STV's shares soared from 443p to 501p - although they are still 19p below the price paid by MGN - while MGN's shares closed 11p higher at 139p. MGN, which owns 28 per cent of Newspaper Publishing, publisher of the Independent, says it is not interested in acquiring STV. Instead, it wants to use STV's programme-making skills for the cable services it plans to launch. It also believes there could be scope for co-operation - for example on news-gathering or advertising sales - between the Daily Record, its Scottish tabloid newspaper, and STV.

Its first cable venture was announced last week, when it said it was to launch Live TV, a national cable network, in a joint venture with five cable and television companies.

A local version of the service is to be started in Birmingham, in association with Midland Independent Newspapers, publisher of the Birmingham Post and Evening Mail, and MGN would be interested in considering a similar scheme with Scottish.

Murdoch MacLennan, managing director of the Scottish Daily Record - which carried out the share purchase - said: 'We believe that exciting opportunities exist for mutual co-operation between our two leading media companies in Scotland. We do not believe it is necessary for the two companies to come under common control for these benefits to be achieved. We have, therefore, told STV that . . . we would like it to explore ways in which SDR and STV can jointly develop their operations to the benefit of both companies and their respective shareholders.'

The response from STV was, however, ambivalent. While it stopped short of attacking the share purchase, it said it believed MGN's newspaper interests meant 'media cross ownership will continue to be particularly relevant to Scotland'.

David Montgomery, MGN's chief executive, has already talked informally with Gus Macdonald, STV's managing director, and further meetings are likely. Mr Macdonald has long made it clear that he wants to keep STV independent.

It is likely that the Monopolies and Mergers Commission would investigate a bid by MGN for STV as it would give it control of a substantial proportion of the Scottish advertising market. MGN has made no secret of its ambition to expand into broadcasting. Few, however, believed MGN's claim that it did not intend to make a full bid. The Government has completed a review of the restrictions on cross-media ownership, which prevent newspapers owning more than 20 per cent of a broadcaster. MGN may take its stake up to the 20 per cent threshold. A number of other newspaper groups have taken stakes in broadcasters in anticipation of the relaxation, including Pearson, publisher of the Financial Times, which owns shares in Yorkshire-Tyne Tees. Associated Newspapers, publisher of the Daily Mail and Evening Standard, and Guardian newspapers have interests in cable television.

The 14.9 per cent stake cost MGN pounds 37.4m, which will increase its gearing to about 69 per cent.

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