Carlton and United 'in talks' over £7bn merger

The ITV television network looked set for its biggest shake-up in years after rumours swept the City last night that Carlton Television and United News and Media are to merge to form a £7bn media giant.

The ITV television network looked set for its biggest shake-up in years after rumours swept the City last night that Carlton Television and United News and Media are to merge to form a £7bn media giant.

News that they were to hook up to form the second-largest television group leaked out as lawyers and bankers for the two sides remained locked in overnight talks in anticipation of an official announcement on the Stock Exchange today.

The merger will create a media behemoth whose portfolio ranges from independent television stations, national newspapers including The Express and The Star , magazines and a myriad other interests.

Both have weathered shareholder criticism that they were under-performing and appeared to be losing ground to the largest player in the sector, Granada. Carlton's share price recently nearly suffered the ignominy of being ejected from the FTSE-100 list of leading blue-chip companies.

Last night at the close of the markets Carlton and UNM were valued at £3.5bn and £3.7bn respectively.

The tie-up will bring together two of the most prominent players in the British media sector in Carlton's chairman, Michael Green, and United's chief executive, the Blairite peer Lord Hollick.

It is understood that Lord Hollick will be the chief executive of the new group, while Mr Green will become its chairman, it was reported last night.

If the merger goes ahead it is bound to raise regulatory issues on cross-media ownership and broadcasting controls. Under the current regulations, no single ITV company can control more than a quarter of the total national television advertising revenue.

Carlton has television interests in London, the Midlands and the South-west and, with UNM owning Meridian, Anglia and West Country television franchises it would, at first sight, suggest a breach of the regulatory limit.

The attempt to merge would attract the scrutiny of both Chris Smith, Secretary of State for Culture, Media and Sport, and the Secretary of State for Trade and Industry, Stephen Byers, as it needs clearance from the Independent Television Commission and the Office of Fair Trading.

The merger would also see consolidation of the pay-TV terrestrial digital channel, OnDigital. Carlton holds a 50 per cent stake in the channel together with its rival Granada, which has a 20 per cent stake. The larger group would have more room to bear the roll-out costs of the digital channel so that it can retain its foothold in the emerging market.

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