Green raises pounds 2bn to start fight for MAI

Carlton Communications, Michael Green's media company, is raising a pounds 2bn war chest that will enable it to intervene and possibly scupper the pounds 3bn merger between United News & Media and MAI, the television to money-broking firm.

According to banking sources, Mr Green's advisers have been told they must have a pounds 1.8bn banking facility in place by next Monday, when a full bid for MAI or a stock market raid for a significant shareholding is now widely expected.

Adding further to the speculation, it emerged yesterday that Carlton has approached Merrill Lynch, the giant US investment bank that now owns Smith New Court, with a view to it advising on the deal and giving Mr Green and his current advisers even greater fire-power. Merrill Lynch, which is acting on the defence of BET against Rentokil's pounds 1.8bn hostile bid, declined to comment.

Carlton is said to be about to appoint a financial public relations firm, possibly Financial Dynamics, to assist it in what could be a bitter bid battle.

Carlton's banking arrangements are said to be going smoothly, with bankers keen to lend to the relatively highly rated Carlton. The group last year moved from having low borrowings of nearly pounds 51m to a net cash position of pounds 90.6m.

It is not clear whether the nearly pounds 2bn is earmarked solely for MAI, or whether Carlton plans a share issue to raise further funds to finance its ambitious acquisition plans. Carlton's banking advisers are Hambros.

Carlton's name has been linked with a series of pontential takeover targets, including MAI, HTV, Mirror Group and even United News & Media.

The merger between MAI and Lord Stevens' United News, owners of the Express titles, was unveiled earlier this month and was widely viewed as a defensive manoeuvre. One analyst said at the time: "The things people will do to keep out of the clutches of Michael Green."

On current ratings, pounds 1.8bn would be a reasonably full price to pay for MAI, which owns two ITV licences - Anglia and Meridian - coveted by Mr Green. Along with Carlton's existing franchises, Carlton TV and Central, the enlarged group would control more than 40 per cent of the ITV advertising market, enough possibly to trigger a monopoly reference. Mr Green would also inherit MAI's money operations, which are notoriously difficult to value.

A price tag of nearly pounds 2bn would translate into about 550p per MAI share, a healthy premium to today's price, which was up 4p at 436p, in light trading.

MAI's price has been moving consistently upwards on the rampant stock market speculation about a move from Carlton. The rumours have helped drive the entire broadcasting sector, which continues to outperform the rest of the market.

A leading broker said of yesterday's price rise in MAI: "It's been more of the same. The market is anticipating or pondering potential news by Carlton. Until Carlton clarifies its intentions this speculation will continue."

Lord Hollick, MAI's chief executive, who hopes to seal the deal with United on Friday week, said yesterday: "I have no comment to make until something happens. I look forward to reading all about in the newspaper."

He added that he was content with his existing advisers, led by Kleinwort Benson. MAI's brokers are SBC Warburg, at whose offices Michael Green was due to have a meeting yesterday. It is understood that Warburg cancelled at the last minute.

A takeover battle would prove intensely bitter, given the two men involved. Lord Hollick and Mr Green have been rivals for several years, having competed head to head in the last round of ITV takeovers in 1993. Both men are intent on playing a key role in the consolidation of the UK media sector, launched by the Government's tabling of a new Broadcasting Bill to liberalise cross-media ownership rules.

Lord Hollick waded into television through a joint bid with partners for Meridian, the southern England franchise, in 1991, adding Anglia Television in 1994. He started in business on his own at the age of 29, when he took on a bankrupt company, the old Mills & Allen sign company.

The Labour peer has little politically in common with Mr Green, with whom he is known to have clashed. Mr Green gave a controversial pounds 15,000 contribution to the Conservative Party in 1992 - which some thought ought to disqualify him from the chairmanship of ITN, the news provider for Channel 3 companies.

Mr Green began in business with a family-owned printing firm, taking his first run at television through an unsuccessful bid for Thames in 1985. His Carlton Communications won the London weekday franchise from Thames in 1991, adding Central through an agreed takeover in 1993.

Mr Green is infamously tight-lipped and enigmatic, even according to those who work closely with him. Lord Hollick, too, is uncomfortable in public, but just as intent on succeeding as a major media executive.

Hurdles that Carlton will have to overcome

Carlton faces several obstacles if it is successfully to bid for MAI. Michael Green, the company's chief executive, would have to canvas his largest institutional investors, which include a who's who of the City, to ensure they were support a high-risk bid. They include Norwich Union with 3.4 per cent and Scottish Widows at 3 per cent.

He would also have to convince MAI's shareholders, who are currently considering the proposed merger between MAI and United News & Media, worth about pounds 3bn.

More serious obstacles are presented by the limits of the current Broadcasting Act and undertakings agreed by the major ITV companies and the Office of Fair Trading over their share of total advertising revenues.

The ownership limits could be evaded by setting up "deadlocked" companies, a device used by MAI and United to proceed with their merger plans months before the Government is expected to pass legislation. Under the rules, Carlton would be allowed up to 15 per cent of the total television audience - a ceiling it can just meet following a takeover of MAI.