Pearson faces rival bid for SelecTV
Cable wars: Flextech move would provide US giant with new bridgehead into UK television programming market
Tuesday 19 December 1995
and DAVID HELLIER
Cable and satellite programmer Flextech last night emerged as a surprise rival bidder for SelecTV, the television company that makes Lovejoy and Birds of a Feather. Its interest could scupper a planned pounds 45m bid from media and publishing giant Pearson - which has been performing due diligence on the company since early last month.
According to informed sources, Pearson has found some instances of creative accounting and unusual transactions, which has prolonged the review process and allowed rival bidders to enter the fray. Pearson is still expected to launch its offer, as early as tomorrow, but only on two conditions. First, SelecTV would have to sell its loss-making cable channel, which features re-runs from the SelecTV programming library.
As well, SelecTV's 15 per cent stake in Meridian, the ITV licence holder, would have to be sold on. This is likely to go to MAI, Lord Hollick's media and financial services company, which already owns 68 per cent of Meridian.
The cable channel has attracted the interest of at least two buyers, one of which is believed to be Carlton Communications. Carlton has said it plans to expand in cable and satellite broadcasting.
Flextech, for its part, has had talks with SelecTV's bankers, Guinness Mahon and directly with Allan McKeown, the target company's founder and chief executive. Flextech may be prepared to put up its 20 per cent stake in Scottish Television in exchange for a controlling interest in an enlarged SelecTV.
That would give one of Flextech's main backers, the giant US cable operator TCI, an opportunity to extend its burgeoning UK television interests.
A bidding war for SelecTV could send the share price, now at 30p, upward. Mr McKeown's personal stake in the company would be worth pounds 3m at Pearson's likely offer price, and considerably more if options are included.
But concerns about oddities in the company's accounts could have the opposite effect.
The company also faced the prospect of a pounds 150,000 lawsuit from Mirror Group and NBC, it partners in an aborted bid for Channel 5, to cover bid development costs.
SelecTV last night denied that it owed the consortium partners any money.
A Pearson spokesman declined to comment on the findings of its accountants. But there was speculation last night that the mix of Mr McKeown's private and corporate interests may be a focus of attention, along with Mr McKeown's lavish expense account.
Examples of Mr McKeown's unorthodox management style include announcing the launch of the SelecTV cable channel before alerting the board - and neglecting to record his insider status in minutes of board-meetings when authorising a payment of $400,000 made by SelecTV to Tracey Ullman, his actress wife, in 1993. The sum was negotiated by Ms Ullman's agent and SelecTV for her services to the company.
A SelecTV spokesperson explained that Mr McKeown "declared his interests in the annual report and elsewhere. There has never been any secret that Tracey Ullman did work for SelectTV." Ms Ullman starred in Tracey Takes On New York for Witzend Productions, a SelecTV subsidiary.
In the past Mr McKeown has been accused of failing to meet corporate governance standards. Two years ago, the then chairman Michael Buckley attempted to oust Mr McKeown, claiming that he was guilty of serious lapses in his running of the company. Mr Buckley himself resigned when the board backed Mr McKeown instead.
Since then, the company has gone through three finance directors, the most recent of whom, David Adair, left last month. It has also lost several other main board directors. Some of those departing directors have been concerned about the overlap of Mr McKeown's and the company's interests - most notably a lease on his Mayfair house in Derby street, which was taken out by SelecTV during Mr McKeown's two-year stint in the US in the early 1990s. Mr McKeown, who was paid pounds 51,500 a year in rent, was paid an additional pounds 25,750 upon his return to Britain in 1993 when SelecTV relinguished the lease.
Pearson is believed to be bemused but not overly concerned by the oddities it has uncovered. It is thought the company's experience in other media acquisitions have reassured it that such a mix of private and corporate interests is relatively common.
If its bid is successful, Pearson would move to "professionalise" the company, bringing it under its growing Pearson Television arm, which includes Thames Television and Grundy Worldwide.
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