Pearson poised for SelecTV

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The Independent Online
MEDIA GROUP Pearson is combing through the books of SelecTV, maker of the hit series Lovejoy and Birds of a Feather, after agreeing an outline deal that may lead to a pounds 45m-plus bid for the independent TV producer before the year's end.

Pearson, which owns Thames TV, hopes to complete its review in the next fortnight but warns SelecTV investors not to expect much of a premium to the current 283/4p share price.

Sources say certain "accounting irregularities", though nothing illegal, have already been thrown up by the exercise, and Pearson, whose TV operations are headed by Greg Dyke, may yet walk away if the terms demanded prove too steep.

"There is a broad agreement, but subject to due diligence, the price may fall severely. There are many complications," said a source close to the talks.

SelecTV shares leapt from 26p to a high of 341/2p after it effectively put itself up for sale six weeks ago. The price has since drifted and no firm deal has been announced.

Industry sources say founder Alan McKeown, husband of actress Tracey Ullman, has already rejected a pounds 35m offer from Chris Wright's Chrysalis group. That valued SelecTV's 15 per cent stake in Meridian, which owns the southern England ITV franchise, at pounds 25m, against the pounds 30m or so SelecTV has been hoping for.

The programme-making arm was valued at pounds 6m to pounds 8m, SelecTV's library at pounds 3m and its new, loss-making cable channel at nil.

Pearson is interested in the library and production side to fold into Thames. The only natural buyer for the Meridian stake is Lord Hollick's MAI.

Lord Hollick, whose relations with Mr McKeown are frosty, already controls Meridian and bid pounds 25m through Chrysalis.

Mr McKeown's maverick personality led to turmoil at the top of SelecTV. Co-founder Michael Buckley left two years ago after a row over payments to Mr McKeown. Several other directors left in June. SelecTV has been through three finance directors in the past three years. The last, David Adair, was pushed out two weeks ago.

Pearson, meanwhile, has transformed itself in recent years from a sprawling conglomerate into a media and leisure group, owning Penguin books, the Financial Times, Madame Tussaud's and Alton Towers. It also recently won the UK's Channel 5 TV licence, beating SelectTV's UKTV consortium, which on Friday joined Richard Branson's Virgin in seeking a judicial review.

Now capitalised at pounds 41m, SelecTV is a drop in the ocean for pounds 3.7bn Pearson. However, analysts have been concerned about the group's perceived willingness to overpay to achieve its media ambitions.