ITV pays up to £175m for Friends Reunited

The broadcaster ITV has agreed to pay up to £175m for Friends Reunited, the website which puts old pals back in touch.

Under the terms of the controversial acquisition, ITV will pay £120m up front with the rest paid later depending on Friends' performance over the next few years under its chief executive, Michael Murphy.

Mr Murphy's management team - owners of about 30 per cent of Friends shares - are locked in for several years.

Charles Allen, ITV's chief executive, has overcome objections from some of his biggest shareholders to push through his first major deal since Carlton and Granada merged.

Some still fret that ITV is paying is too much, and remain lukewarm about potential benefits from the acquisition. ITV is stumping up between 20 and 30 times Friends' underlying earnings, which is seen as pricey within the media sector.

Some shareholders fear ITV may be panic-buying in order to combat declining audience figures at its core ITV1 television channel. But Mr Allen is keen for ITV to tap into the burgeoning online ad market - slated to be worth more than £1bn next year.

The sale sees Friends' founders, Julie and Steve Pankhurst, scoop north of £30m for selling out of a business they set up just five years ago in their house in Barnet, north London.

Friends has 12 millionsubscribers. Profits of £6.5m are expected this year, up from £4.6m last time.