Outlook: Robinson may return to his roots for the big one

GERRY ROBINSON and Charles Allen have become one of the City's more enduringly successful double acts. A record of consistent growth on the back of exquisitely timed take-overs has helped Granada more than triple earnings over the past six years. Mr Robinson as chairman and his faithful hound, Mr Allen as chief executive, have proved a dab hand at micro-managing established franchisees, from motorway service stations to contract catering and ITV franchises, consistently squeezing top notch returns out of this odd ball combination of the dull and glamourous.

But for how much longer? Yesterday Mr Robinson admitted that a big acquisition is very much back on the agenda. There's only so much margin that can be squeezed out of a roadside snack and with the share price beginning to sag, Granada badly needs a fresh infusion of red corpuscles to keep the show moving forward.

The last time Mr Robinson cut loose was nearly four years ago with the hostile pounds 3.7bn bid for Forte. That battle captivated the City and paved the way for a boom in profits. But the infusion is running out of potency and now more is needed. Unfortunately, Granada may find it more difficult now to pinpoint a target with the same mouth-watering upside potential.

For a start, the business cycle, at its low ebb when Granada nailed down the hotelier, is now conspiring against a deal. In most hospitality and media businesses, profits growth has been strong and there is far less of an earnings rebound to go for than in 1995. Competition rules are also problematic. Granada is unlikely to be able to expand much in television ahead of a new broadcasting act, while the group is close to being a dominant operator in catering and roadside service stations.

On the media side, moreover, valuations are sky high, and any deal of consequence would severely dilute earnings for years. The occasional bolt- on acquisition, such as Scottish Media, isn't going to make much difference one way or the other, merely bolstering as it would an already established position. Then again, an obvious media bid target, such as EMI for around pounds 5bn, would expose Granada to the uncertainties of global competition. With his present reliance on the more predictable earnings streams of the quasi-monopoly ITV franchises and their related programme making operations, EMI is probably not the sort of business Mr Robinson would excel in.

For that, he is going to have to return to his business roots. Granada allows Mr Robinson to hob nob with famous actors and TV presenters, but let it not be forgotten that he cut his teeth as a young manager with Grand Metropolitan, and it is in this less than glamourous, underperforming sector that he'll be looking for the next mega deal. The obvious targets are Bass and Whitbread. Both are poorly regarded in the City, trade at only 10 times earnings and are ideal candidates for the Granada micro- management treatment. Their CEOs had better not go shooting, for that, as Sir Rocco Forte still knows to his cost, is when Mr Robinson is at his most dangerous.