Hollick's TV empire is sold in a 'friendly' deal

ITV, Britain's biggest commercial television channel, moved from three principal owners to two yesterday when Granada Media agreed to buy the broadcasting and programme making operations of Lord Hollick's United News & Media for £1.75bn.

ITV, Britain's biggest commercial television channel, moved from three principal owners to two yesterday when Granada Media agreed to buy the broadcasting and programme making operations of Lord Hollick's United News & Media for £1.75bn.

Charles Allen, chairman of Granada Media, and Gerry Robinson, the former chairman and now Arts Council chairman, forced the purchase amid veiled threats to make a hostile bid for United - which also owns Express Newspapers - had Lord Hollick resisted a "friendly" deal.

Already the largest ITV group, Granada now dwarfs its remaining rival Carlton Communications, which last week abandoned plans to merge with United because of regulatory obstacles.

Mr Allen said a Granada-led ITV would move aggressively to embrace multi-channel television, and that a package of ITV-branded channels was likely to become available on Sky Digital next year. Until now, satellite viewers have been forced to switch to ITV's terrestrial signal to view Channel 3.

"The big strategic issue is putting a multi-channel ITV on Sky," Mr Allen said. He brushed aside suggestions that Granada Media had fallen behind BSkyB, which will soon have 5 million digital subscribers. "[Granada Media] is a real business with real turnover and real profits," he said. "I don't think we're falling behind Sky."

The acquisition of Lord Hollick's three ITV licences - Anglia in eastern England, Meridian along the south and south-east coasts and HTV in Wales - gives Granada Media £1bn in annual advertising sales, one-third of Britain's television advertising market.

Granada Media already owns the Manchester-based Granada licence, London Weekend Television, Yorkshire TV and two smaller licences in Teesside and along the Scotland-England border.

Mr Allen said: "This is not only a transforming deal for Granada, but a transforming deal for ITV. It moves ITV from a federation to a partnership. Through collaboration with Carlton there is an opportunity to seize many of the benefits of a one-company ITV."

With more than £500m in annual programme sales, the enlarged Granada will be Britain's biggest television content provider after the BBC. Granada favourites such as Coronation Street will be joined by United programmes such as Survival and Where the Heart Is and its wildlife programme making arm.

The link will also bring together online assets. Both companies have been developing multimedia educational content for schools and other new media content.

The week of meetings that led to the deal focused on securing the lucrative TV assets.Mr Allen said: "This is a good deal. We are buying very good assets at a very good price."

For £500m cash and £1.25bn of its shares, Granada Media gains a big presence in prosperous southern England to go with its dominance in the North. But Mr Allen wasted no time in setting his sights on the next round of consolidation, expected some time after 2003 when changes are made to the Broadcasting Act. "I think we will be continuing to lobby for a single ITV," he said.

To do that, Mr Allen will have to take on Michael Green, the founder and chairman of Carlton. Mr Green will have been relieved yesterday that Granada targeted United; earlier this month the Competition Commission gave Mr Allen and Mr Robinson carte blanche to pursue either rival.

What stopped a move on Carlton was the Commission's ruling that, for now, no one ITV company can own more than two of the top four franchises - Carlton TV, Central, LWT and Meridian - or both London licences. Had Mr Allen bid for Carlton, one London licence would have had to be sold.

Broadcasting Act rules limiting any ITV company to 15 per cent of national viewership mean that Granada Media will have to sell HTV, most likely to Carlton. "I phoned Michael Green this morning," Mr Allen said. "I think we'll talk about it next week."

When negotiations on HTV begin, Carlton's Mr Green will hold a strong bargaining chip - a 20 per cent interest in Meridian worth £180m that Granada is keen to buy. That and about £250m in cash would secure HTV for Carlton and complete - for now - the carve-up of ITV.

Mr Allen said the estimated £38m in annual savings from combining Granada Media and United would come from infrastructure rationalisation and lower transmission costs. "I don't see this as a job reduction exercise. We're looking at building businesses."

Lord Hollick will have been bitterly disappointed at the outcome of his attempt to become a major media player. Particularly galling is that the Labour peer's hopes were railroaded by the Government of which he has been so supportive.

The Government put Granada in the driving seat by demanding the sale of Meridian if it allowed the United/Carlton deal. Lord Hollick could be forgiven for feeling that being one of "Tony's cronies" should be more rewarding.

Instead of leading a major multimedia force, Lord Hollick, as United's chief executive, will be left running a company whose best known assets are the Express and Daily Star newspapers, a new media division, and a business services division covering business and technology magazines, information and trade exhibitions.