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at pending Carlton-United merger
Bid to buy either puts deal before regulators
By Simon Bond
Granada, the UK's largest commercial TV broadcaster, has finally responded to the merger plans of its two nearest rivals--Carlton Communications and United News & Media--by announcing that it may bid for either of them.
When Carlton and United announced their intention to merge in November last year, a counter move by Granada was widely expected. But the company has waited for New Year hangovers to clear before asking the Office of Fair Trading, a government watchdog, to register its interest in buying either Carlton or United.
UK law requires that this interest be automatically considered in the context of the $13 billion proposed merger between the two companies.
Though immediately rejected by both targets, Granada's "interest" will hugely increase the chances of the Carlton/United deal being referred to the Competition Commission, a regulatory agency with real powers to make or break the merger altogether.
The Office of Fair Trading is already under pressure from the big advertisers to refer the merger on the grounds that it would break restrictions that prevent any one network broadcaster from controlling more than 25 percent of national television advertising revenues. The merger would take the combined company's share to over 36 percent, even before Granada becomes factored into the equation.
Any move by Granada also faces the problem of breaching the antitrust law that prevent any one company controlling more than 15 percent of the UK's television audience. Granada has 11 percent of the national audience, and if it acquired United this would rise to 17.3 percent, and if it took over Carlton it would control 19.3 percent.
Granada refuses to specify which of the two takeover targets it would prefer and has said it will not make a formal bid until the regulators had completed their review, a process that could take several months.
Advisers to United and Carlton have accused Granada of attempting to muddle the merger to the point that it fails.
Predictably, Granada's chief executive, Charles Allen, insists that the move is positively motivated by a desire to drive up shareholder value.
In response to the move by Granada, both Carlton and Granada have reaffirmed commitment to their own merger.
However, analysts say that Granada's interest makes sense. Having missed the boat with the Carlton/United tie-up, the UK's No. 1 commercial broadcaster could not afford to sit on the sidelines and watch its two main rivals erode its dominance of the commercial broadcasting network.
For a mere "'register of interest" Granada has been able to get back into the consolidation game and almost certainly condemn the Carlton/United merger to a full referral with the competition authorities.
Undoubtedly, a double win for Charles Allen and a chance for the regulatory authorities to "spring clean" the rules that govern the UK's commercial broadcasting sector in order to allow these three companies to come together as one.
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Simon Bond covers European media for Media Life, writing from outside of London.