Granada allowed to launch ITV takeovers

The independent Television Commission signalled qualified approval yesterday for a possible £4bn hostile takeover by Granada Group of either Carlton Communications or United News & Media.

The move comes five weeks after the ITC offered a similar assessment about an agreed merger of Carlton and United.

In a submission to the Competition Commission, which is vetting the agreed Carlton-United link-up as well as possible rival bids from Granada, the ITC said yesterday "it is contemplating the possibility of some relatively minor relaxation of its own rules".

It is believed that the ITC would approve a link-up of any two of the three companies on condition that advertising market share of the new group is held to around 30 per cent. Since any combination of two of the three companies would breach the ITC's current 25 per cent advertising market share ceiling, an enlarged group would need to spin off one or more of its regional ITV franchises.

Currently, Granada has about 20 per cent of total television advertising revenue. Carlton and United account for 21 and 14.5 per cent respectively. Each company gave undertakings in 1996 to keep below the 25 per cent ceiling.

Should Granada take over one of its rivals, the company's sales house would account for more than half of Channel 3 advertising sales. In this scenario, the ITC believes it necessary to have responsibility for 10 to 12 per cent of advertising sales transferred to another company. It would also seek safeguards to ensure that smaller ITV franchises would not be limited to dealing with a single sales house.

Any combination of the companies would also surpass rules in the Broadcasting Act that limit companies to holding a maximum of 15 per cent of total television viewership.

The regulator also expressed concern that ITV ad rates "in recent years have been steadily rising". However, it said that "a merger involving Granada would not seem to us to create the same north/south imbalance in advertising as may arise with a merger between Carlton and United".

The ITC licences and regulates broadcasters but cannot block mergers. It does, however, exercise considerable influence with the government and other regulators.

Yesterday Granada closed up 6p at 633p, while Carlton added 5p to 758.5p and United slid 25p to 757.5p.