Westcountry chief pockets pounds 4m from bid
Monday 25 November 1996
The surprise weekend deal was also expected to re-ignite takeover frenzy in the commercial television sector, with attention turning to HTV, the ITV company for Wales and the West.
Both Carlton and Lord Hollick's United News & Media, which was widely tipped to win Westcountry, were seen as likely bidders for HTV.
Mr Redfarn will receive between pounds 3.5m and pounds 4m from the deal, as part of long-term incentives totalling pounds 8m for Westcountry staff. Mr Redfarn was instrumental in putting together the consortium that won the franchise in 1993.
Carlton's move, which saw Westcountry snatched from the odds-on favourite at the 11th hour, is likely to deepen the rivalry between Mr Green and Lord Hollick, United's aggressive and acquisitive chief executive, both of whom are intent on taking part in the wholesale consolidation of the ITV sector sparked by the recent relaxation of ownership rules.
United had hoped to stitch together an ITV empire stretching across the South of England and Wales, grouping its own Meridian and Anglia franchises with Westcountry and HTV. The company had spent nearly two weeks haggling over the terms of its bid for Westcountry, while Mr Green's late offer was accepted in just two days. "Michael Green has just blown Hollick's strategy to bits," an insider at HTV said.
Sources at Westcountry said that tensions between United's negotiating team and Westcountry, particularly over minor details and what one source called "nickel and dime" tactics from Lord Hollick, were a chief reason United failed to clinch the deal. Lord Hollick, widely viewed as a shrewd, if at times overly aggressive, negotiator, was unconvincingly described yesterday as "disappointed but far from livid" at the outcome.
Carlton's bid was made directly to the company's main shareholders - Daily Mail & General Trust, Brittany Ferries and South West Water - late Wednesday and was pounds 10m higher than United's offer of around pounds 75m. Westcountry is expected to earn about pounds 8m this year, but is heavily dependent on the Channel 4 levy and a programme subsidy from ITV that is likely to be phased out.
The deal marked a rare, if expensive, victory for Mr Green, who has been wrong-footed twice by Lord Hollick - first when United News & Media merged with Lord Hollick's MAI group early this year and more recently when United beat Carlton to a 20 per cent stake in HTV, sold by Scottish Television. The Westcountry victory was seen as a crucial indication that Mr Green would not sit idly by as the ITV map was redrawn.
At issue are the key airtime sales arrangements in the ITV sector, which are set for further consolidation. HTV and Westcountry's airtime sales are currently handled by United's sales house, TSMS, but Carlton Sales is expected to take the tiny Westcountry business next year. Analysts said Lord Hollick could not afford to see HTV's sales also move to Carlton, which owns the London weekday and Central ITV franchises. HTV provides transmission services to Westcountry, making it even more likely that the two franchises would be more profitable if owned together.
A takeover battle for HTV would be expensive and hard-fought. United paid 420p a share for its 20 per cent HTV stake, valuing the company at pounds 365m, but said then it had no intention of making a full bid. As a result, United would be forced to offer at least 420p a share under Takeover Panel rules, barring a bid from a third party. For its part, Carlton has said it did not want to over-pay for TV assets, although the Westcountry victory suggests that strategy may have changed. A source close to United warned yesterday, however: "When Michael comes to bid for HTV, he will see Clive [Lord Hollick], smiling at him over the barricade, with a blocking 20 per cent stake."
Market watchers now expect action on several fronts. Granada, the leisure and media conglomerate, is the most likely buyer of Yorkshire-Tyne Tees, in which it already holds a 27 per cent stake. A move may await the disposal of Granada's Exclusive Hotels, which are being sold to pay down pounds 3.5bn in debt taken on to buy Forte early this year. Granada could also buy tiny Border TV, while Scottish is the most likely buyer of its franchise neighbour, Grampian.
Mr Green stressed at the weekend that the Westcountry acquisition would be earnings enhancing for Carlton shareholders from the start. He also undertook to honour existing contracts, and is understood to be in discussions with Mr Redfarn about his future role.
Deals still to come in the ITV sector
Target Price Leading contenders
HTV pounds 350-pounds 365m Carlton, United
Tyne Tees pounds 800-pounds 900m Granada, United
Border TV pounds 30-35m Granada
Grampian pounds 110-120m Scottish Television
Scottish pounds 450-500m Carlton, United
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