pounds 180m issue by United revives talk of TV bid

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The Independent Online
United News & Media yesterday tapped the financial markets for pounds 180m, prompting renewed speculation that it would soon make fresh moves in the commercial television sector.

Proceeds from the issue of convertible bonds, carrying a coupon of just over 6 per cent, was said by the company to be earmarked for debt repayment and "general corporate purposes," and would replace existing debt with what the company called "better quality, longer-term debt". A spokesman added: "It's a housekeeping exercise."

But analysts said United, headed by Lord Hollick, was poised to pay between pounds 75m and pounds 80m for Westcountry, the ITV licence holder for the South West, in a widely flagged deal that could be announced by early next week. The debt "swapping" exercise could provide a higher comfort level to investors in advance of the acquisition.

Speculation was mounting yesterday that the Westcountry deal would be followed in the future by a bid for HTV, the ITV licence holder for Wales and the West, which is worth about pounds 350m at current market prices.

Derek Terrington, analyst at Teather & Greenwood, said: "UK television is going to consolidate further, and we all know what the targets are: it is just a matter of who and when." Chief among the likely targets are HTV and Yorkshire-Tyne Tees, in which Granada, the widely tipped buyer, has a 27 per cent stake.

United, which has been active on the acquisition front in recent months, is widely seen as the most aggressive of the companies operating in the ITV sector. Under new ownership rules, in place since 1 November, companies are permitted to own as many licences as they like, provided they do not exceed 15 per cent of total audience (including the BBC).

Analysts said United's financing move was also an effort to lock in a relatively low interest rate at a time when many forecasters expected interest rate rises. The issue was called by some commentators a "rights issue by the back door," because the bonds can be converted into United shares.

"A straightforward rights issue would not have gone down well in the City," one leading media analyst said. "With United's high debt, it wouldn't make sense to issue equity."

Louise Barton, analyst at Henderson Crosthwaite, said the financing was "opportunistic and cheeky," adding "they didn't really have to do it unless they have something in mind." She added that the timing of the issue might create concern in some quarters that United was poised to make a significant corporate move in addition to the "relatively minor" acquisition of Westcountry.

Indeed, concern that it might be obliged to overpay for TV investments helped send United's shares down 18p to 679p, reversing the gains of Wednesday.

The City has been granting Lord Hollick relatively robust support in recent months, and cheered his disposal of some regional newspaper interests and the purchase of Blenheim.

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