Shares in Sunset & Vine, the independent television producer, fell by 17 per cent to 110p yesterday after the company issued a profits warning and said that it was seeking either a merger or a "substantial" acquisition.
Sunset & Vine said that its financial performance had been impaired by competitive conditions, particularly in the outside broadcast market.
Consequently, profits for the second half would not significantly exceed the pounds 278,000 achieved in the first.The company would release no further details of any possible negotiations.
Sunset & Vine is best known for its sports coverage which includes French horse racing for Channel 4, cricket for Sky Television and a special series on tennis player Michael Chang for Hong Kong.
It is believed that the company must grow significantly in size to maintain its momentum. It has been active recently, paying pounds 750,000 for a majority stake in Music Box, an independent producer of music programmes
The company said then that the deal would allow it to expand away from its previous focus on sports.
Last year Sunset & Vine bid unsuccessfully for United Racecourses, which operates three tracks including Epson, home of the Derby, Kempton Park and Sandown Park.
Robert Sangster, the millionaire racehorse owner was poised to join the Sunset & Vine board if the bid had been successful.
Richard Thompson, the former chairman of Queens Park Rangers who paid 140p for a 7 per cent stake in the company, stepped down from the board last October.
More recently the company has signed a three-year deal with the BBC to televise the Prix de L'Arc de Triomphe, the French Derby and a number of other races.
In April the company reported a9 per cent increase in profits, though the figures were affected by last year's pounds 2m deal to buy Mobile Image.