ITV trio bids £40m for Chrysalis arm

A trio of leading television executives including the former head of Granada have joined forces to table an offer for Chrysalis' TV production arm – the business behind Channel 4's Richard & Judy chat show, ITV's Midsomer Murders drama series and Five's 5th Gear car programme.

Steve Morrison, who quit as chief executive of Granada in August in the wake of the ITV Digital disaster, with a controversial pay-off of just over £1m, is working on the deal with Jules Burns, Granada's former managing director of operations. The third member of the management buy-in team is David Liddiment, who left ITV as director of programmes just before Christmas, after commissioning hit shows including Who Wants to be a Millionaire and Popstars.

Mr Morrison said: "What we thought when we left our various corporate jobs was that it would be wonderful to get together and run our own production company."

The three men, who have worked together on and off for about 25 years, plan to launch an offer for the Chrysalis division with the backing of a private-equity house. The price tag is estimated at between £35m and £40m.

Chrysalis's TV production arm houses Cactus Television, the brand behind Richard & Judy, as well as Bentley Productions, the maker of Midsomer Murders and ITV's Ultimate Force. The unit also has operations in New Zealand, which makes Shortland Street– a Coronation Street-style soap – as well as in the Netherlands.

"What you have in Chrysalis is the largest UK-owned independent production company in Britain by turnover and they're very strong across the genres. They've got perennial programmes in drama, like Midsomer Murders, in sport, like Formula 1 and World Rally, in entertainment, with the Richard & Judy show, and in comedy with Black Books," Mr Morrison said.

Chrysalis said it was in "exclusive" discussions with the team but stressed that a deal remained subject to final due diligence and would need shareholder approval. If it goes ahead, it will free up Chrysalis to focus on its radio, music publishing and book divisions. The group operates the London radio stations Heart and LBC as well as the Galaxy brand. Its chief executive, Richard Huntingford, described the planned disposal as "an important step" in becoming a more focused media group. Analysts welcomed the move and shares in Chrysalis closed up 7 per cent at 203p.

Simon Davies, an analyst at ABN Amro, said: "The key to the value of Chrysalis is in the radio assets and we think the market will welcome any increased focus on that core business." The management buy-in team, which is understood to have looked at a dozen or so independent production houses in the UK, started talking to Chrysalis about the possibility of buying its TV arm last autumn. It is hopeful of completing the transaction by the middle of June.