Scottish Media sells stake in Ulster TV after bid rejection

Scottish Media Group yesterday sold its 18.2 per cent stake in Ulster Television, the Northern Ireland ITV franchise, to Canadian media group CanWest after failing to convince Ulster's board to accept a takeover bid.

SMG yesterday revealed that it had approached Ulster earlier this year with a view to making a 240p a share bid for the rest of the company. However, Ulster's board rejected the offer, which SMG described as "full." SMG subsequently decided to sell its shares to CanWest, which offered to pay 250p for them.

CanWest, which already had a 12 per cent stake in Ulster, was subsequently forced to sell some of its shares to bring its holding down to 29.9 per cent - the maximum stake current broadcasting rules allow a company from outside the European Union to own in a British ITV company.

However, CanWest said it had no interest in owning Ulster. The company sees an overlap with its investment in the newly-launched TV3 in Ireland, where it has a 45 per cent stake. The company is keen to foster co-operation between the two companies.

David Asper, executive vice president of CanWest said: "We have acquired our position as a strategic investment and believe that it will foster a productive and collaborative relationship with TV3 in the Republic of Ireland."

For SMG, meanwhile, the deal is attractive because it keeps Ulster out of the hands of the big three ITV players: Granada, Carlton and United News & Media.

"This transaction is a good deal for our shareholders," said Andrew Flanagan, chief executive of SMG. "It should also ensure that Ulster remains independent of other existing ITV franchise holders at a critical time."

SMG, which owns Scottish TV and the Glasgow Herald, built up its shareholding in Ulster last year. In August, when SMG increased its holding to 13.1 per cent, it said it had no plans to make an offer for Ulster.

The buying pushed up Ulster's share price from 130p earlier in the year to a high of 265p in November. Yesterday, they put on 0.5p to close at 243p.

SMG said it had made an exceptional profit of pounds 3.5m on the sale. The company paid an average of 209p per share for the stake. SMG plans to use the pounds 23.9m proceeds to reduce current borrowings and to fund ongoing investment. Its shares were unchanged at 671p.

Analysts said the company was now likely to concentrate on its businesses in Scotland, where it still has some headroom for expansion in other media such as radio. However, they also said that Ulster would ultimately end up in the hands of one of the larger ITV companies.