Granada's Allen is under pressure to go

Pressure is mounting on Charles Allen, chairman of Granada, to step down after the Government has delivered its verdict on the plans to merge the ITV company with Carlton. With just 19 working days to go before the Trade and Industry Secretary, Patricia Hewitt, has to make her ruling, shareholders and possible bidders have Mr Allen in their sights.

If the £4.1bn merger is rejected - or if Carlton and Granada decide the conditions imposed are too onerous - then there are at least two groups preparing to pounce on the ITV companies.

It is understood that the merchant bank Rothschild has held discussions with Michael Grade, the Camelot chairman and former Channel 4 boss, about a bid for Granada. Neither party would comment, but it is thought the plans involve the removal of Mr Allen, to be replaced by Mr Grade, who would build a new senior management team around him.

Discussions between the two parties are understood to have taken place a few months ago before Granada's share price rallied. So a bid is only likely if Carlton and Granada fail to tie the knot.

David Elstein, the former chief executive of Channel Five, is rumoured to be circling. It is thought that he has assembled a team of broadcasting experts, and has sounded out shareholders about an approach. However, unlike Mr Grade, Mr Elstein is prepared to swoop even if Carlton and Granada merge.

Mr Elstein has been particularly vocal over Carlton and Granada's plans to merge their advertising sales operations. This is likely to be one of the central themes of the Competition Commission report into the merger, now sitting on Ms Hewitt's desk. Last week ITV bosses dismissed suggestions that the two sales operations should be split. Mr Elstein, who is now chairman of the British Screen Advisory Council, will raise the issue today when he speaks at the Edinburgh Television Festival.

Shareholders in Carlton and Granada are understood to be becoming impatient with the senior management, in particular Mr Allen. Sources have said that potential replacements for the Granada chairman have been sounded out.

Among the favourites is Roger Parry, the chief executive of the international arm of the US radio and outdoor media group Clear Channel. Mr Parry is understood to have close links with Fidelity, the US fund manager which is the largest shareholder in Carlton and Granada.

The companies have been working on contingency plans in case the merger is blocked or the terms prove unacceptable. These include a virtual merger where the two companies divvy up jobs within ITV and allow the TV network to operate as if it were owned by just one company.