Plot thickens in TV wars.

A week is a long time in television – particularly when the destiny of the ITV network is in the balance.

A fortnight ago Bernard Cragg, the finance director of Carlton Communications, and his opposite at United News & Media, Charles Stern, were poised to push through with a merger announced last November that would have created Britain’s largest commercial TV group.

Cragg was pencilled in as finance director, while Stern was due to act as chief operating officer of the group, which would have been headed up heavyweights Michael Green of Carlton as chairman and Lord Hollick of United as chief executive.

When the two TV companies unveiled their decision in November to go-ahead with a #8.2bn merger the emphasis was on how the resulting economies of scale would translate into better programmes.

The grand alliance, which would have brought together five ITV licences plus a stake in Channel 5, would have been in a position to take on the Granada Group with its #1.3bn war chest raised from its flotation the previous week.

Trade and industry secretary Stephen Byers scuppered the dream when he gave the go-ahead to the merger between Carlton and United, but also gave his approval to rival Granada launching a takeover bid for either of the two companies.

And senior executives at both United and Carlton were further stung by Byers’ decision to drop a limit on any company owning more than 25% of the national advertising revenue in favour of allowing no company control of more than two of ITV’s top four licences.

Carlton and United would have to sell off its prize company Meridian TV, the franchise which broadcasts to 5.5m audience across southern England representing 10% of the UK’s viewers.

Byers said: ‘It is important that we allow ITV to develop in a way that allows it to compete effectively in an increasingly diverse market.’

Without Meridian valued at #500m plus, Stern and the board could only bring Anglia, HTV and its part stake in the Channel 5 to the merger.

The loss proved too heavy a burden for both FDs and their respective boards and last Friday they pulled the plug on the grand scheme.

In a joint statement Carlton and United said they decided not to proceed following the publication of the Competition Commission report.

‘The requirement to dispose of Meridian, one of the four leading ITV licences, undermines the strategic rationale behind the merger and significantly reduces the benefits to shareholders of combining Carlton’s and United’s businesses,’ it said.

United added: ‘There is significant value to be generated from the consolidation of UK television ownership. The Board therefore intends to pursue discussions with interested parties to establish how this value can best be captured for the benefit of United’s shareholders.’

The merger collapse has now opened the way for Granada chief executive and accountant Charles Allen to move into aggressive takeover mode and establish the company as the main force in ITV.

It’s a huge turnaround for Allen who arrived at Granada in 1992, when the company was an inefficient regional TV station, but has expanded the group ready for a new communications act within three years that will hand over the network to one single owner.

Allen and chartered accountant colleague Henry Stanton view United as the best target and it could only be weeks before the rival bid is launched.

A takeover of Granada would also force Allen and Stanton to sell its LWT franchise or Carlton’s London licence under broadcasting regulations.

Even after Byers’ announcement a week before the Carlton and United collapse, Allen confidently stated: ‘From here our position can only get better.’ Analysts also believe that Hollicks could put United up for auction, as well as 35% stake in Channel 5. ‘We are in discussions now and have a number of interested parties,’ a United spokesman said last week.

Another potential buyer is the new giant RTL, which includes UK group Pearson, German company Bertelsmann and Belgium-based Audiofina.

Yesterday RTL was due to float on the London Stock Exchange at #14bn – a market value that towers above Granada, Carlton and United.

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