View from City Road: Take the money and run at TVS

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SO it is goodbye to TVS Entertainment which, it emerged over the weekend, is to be bought by International Family Entertainment, a US secular broadcaster headed by Rev Pat Robertson, the evangelist. But has TVS, which once seemed unable to make a good strategic decision, at last come up with a good deal for its shareholders?

The answer is yes and no. The deal, which has improved over the weekend because it was priced in dollars, looks attractive for ordinary shareholders, but dreadful for preference holders. But as the latter have only 20 per cent of the votes, it will take a concerted effort for them to block any deal and they cannot force the liquidation of the company, which would be in their best interest, on their own.

The deal, which is now worth nearly pounds 40m, offers IFE shares worth 26p or cash worth 23p for each TVS ordinary share. These stood at 21p yesterday, having risen 2.25p. It also offers IFE shares worth 47p or cash of 43p for the preference shares, which rose 4p to 42p.

For this, IFE will get a company, which at 30 June, has debts of pounds 3.5m, made pre-tax profits of pounds 7.6m in the half-year and earned 8.9p per share. But the UK business loses its franchise on 31 December, at which point the company would essentially be MTM, the US production company that has been an albatross around TVS's neck since it was bought for pounds 190m; a TV studio in Maidstone, Kent; and about pounds 10m of cash.

Assuming MTM is worth something, preference shareholders would receive more than 43p a share in an orderly liquidation of assets. But unless MTM is worth more than pounds 25m, ordinary shareholders would not see anything back. MTM was valued in TVS's 1991 accounts at pounds 40m, though no one else in the TV industry seems prepared to pay that much. IFE's offer values it at pounds 25m.

It is clear that TVS, as a corporate entity, has little future beyond 31 December. IFE is using the group as a springboard into the UK, but it also wants MTM. If preference shareholders could be convinced that they could obtain a decent price for MTM in a liquidation it might be worth fighting the deal. But IFE may be the only buyers for MTM, so it may be better to take Mr Robertson's money and praise the Lord.