Scottish puts Ulster Television independence at stake

Ulster Television, one of the few remaining independent ITV companies, looked increasingly vulnerable to a takeover last night after Scottish Media Group bought a 13.1 per cent stake yesterday and said it could not rule out a full bid.

Andrew Flanagan, managing director of Scottish, said last night: "No company in its right mind would say never [to a full bid], because you don't know what the circumstances would be in the future."

Under Takeover Panel rules, Scottish is forbidden from buying Ulster outright within three to six months. However, Scottish could increase its stake in the group to 20 per cent in a week's time, and up to 30 per cent the week after that. Mr Flanagan said that if the price was right and the stock was available, Scottish would consider increasing its stake to the 30 per cent limit.

Mr Flanagan said that Scottish, which has just bought Grampian Television for pounds 105m, shared a view with Ulster that the regional identity of ITV should be preserved. He strongly disagreed with the opinion of Gerry Robinson, chairman of Granada Group, that all ITV should and would be owned by one company within a decade.

The closer involvement between the two companies also made sense, Mr Flanagan said, as advertising sales for both were handled by TSMS.

Mr Flanagan also implied that the purchase - "well-planned over a number of weeks", and taking Scottish's stake in Ulster to almost 15 per cent - was in part a defensive move against the three big ITV players, Carlton Communications, Granada Group, and United News & Media. He added: "The issue in ITV is that with Granada, Carlton and United, you need more weight."

Ulster, Border Television and Channel Islands Communications are the last three independent ITV companies, after a frenzy of consolidation in recent months. Border was, until yesterday, seen as a more likely takeover target for Scottish because of the sensitive political situation in Northern Ireland.

However, Mr Flanagan said yesterday: "I'm not quite sure where the politics gets into this. Lots of companies invest in Northern Ireland; I don't see what is different about us investing in Northern Ireland."

He added that Ulster was a more appealing investment than Border because of its size and "economic performance". Mr Flanagan said Border was "not the most attractive company on the ITV scene".

Analysts said the investment by Scottish made sense, and one commented that a takeover was "inevitable". However, another said a potential merger was worrying from a regulatory point of view, as Scottish was developing a "strong regional monopoly".

"For some reason the regulatory authorities are letting them," the analyst added. As well as having control over the Scottish and Grampian ITV franchises, the company also owns the Herald and Evening Times in Glasgow.

Mr Flanagan dismissed talk of regulatory concerns, saying that if Scottish were to take over Ulster it would have only a 4 per cent audience share by contrast with Granada's 12 per cent since its acquisition of Yorkshire- Tyne Tees Television. No one company can, under current legislation, own more than 15 per cent of the audience share.

Since the beginning of the year, consolidation of the ITV network has gathered speed, with United News & Media snapping up HTV; Granada buying Yorkshire; and Scottish purchasing Grampian.

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