City: Brooke leaves a TV hell

PETER BROOKE'S limited reform of the rules governing takeovers among ITV companies seems to have created more anomalies and misunderstandings than it's solved. This is what an impartial adviser might be telling the National Heritage Secretary after last week's agreed pounds 758m takeover bid by Carlton Communications for Central Independent Television.

'It's rapidly becoming apparent that the only real gainer from the measures you announced a couple of weeks back is Michael Green of Carlton. Gerry Robinson of Granada, who some say will announce a bid for LWT this week, also looks like a probable beneficiary, but it's not nearly as clear-cut as Carlton. From a standing start less than a year ago (he's only been operating the London weekday franchise since January), Mr Green is about to become the most powerful force in independent television with more than 35 per cent of advertising revenue and viewers.

'Normally, such a position, achieved through a takeover, would warrant an automatic reference to the Monopolies and Mergers Commission. Certainly, advertisers say the bid ought to be referred. But it's difficult to see how this could now be justified with your announcement that a single company is allowed to own two ITV franchises regardless of size. You can't give with one hand and take away with the other. It would be a kind of double jeopardy. And in any case, Michael Heseltine, President of the Board of Trade, seems completely sold on the idea that ITV companies need to be bigger to compete adequately on the international stage, so he's not going to back the case for a reference.

'It's already clear that Mr Green's deal with Central is something of a one-off. There are at least pounds 10m of cost savings he can gain annually from it, and that's ignoring the benefits that will come from greater utilisation of Central's Nottingham studios. He's also buying one of the most profitable companies in the business, thanks to Central's successful gamble to bid only a token amount for the franchise. Add to that the perceived benefits to Carlton of becoming the most powerful commercial TV operator in the land, and it's easy to see why the company's share price is soaring. Nobody else is in quite the same position. Granada doesn't know whether to bid for LWT or Yorkshire. For choice it would be LWT, but an agreed deal would be expensive and require a big rights issue. Either way, the takeover won't look as good as Carlton's.

'Meanwhile, other media groups, such as Pearson, Associated Newspapers and the Telegraph, are prevented by rules barring cross-media ownership from joining the fray. By the time the rules are changed to allow such ownership, if they are, the best targets will have been gobbled up. This is plainly an absurd situation. The sanctity of the franchise awards has already been undermined by your decision to allow franchise holders to bid for each other. There's no reason to suppose the likes of Pearson would be any less suitable a TV operator than Carlton.

'In short, the limited change of rules you've announced looks a dreadful and arbitrary muddle allowing the likes of Carlton to consolidate its position in an almost wholly uncontested manner. Nobody can begrudge Mr Green his success, but you can see why others are hopping mad about it.'