ITV channels in pounds 36m deal

MATHEW HORSMAN

Further consolidation of the ITV sector looked likely yesterday, with the news that Scottish Television is set to acquire a 20 per cent stake in HTV, channel-licence holder for Wales and the West.

The deal, to be put to Scottish Television shareholders, would see pay- TV programme packager Flextech take 20 per cent of an enlarged Scottish Television, for pounds 28m. In return, Scottish Television would receive Flextech's 20 per cent holding in HTV, worth pounds 36m at the time the deal was announced early yesterday. Shares in HTV climbed 14.5p to close at 219p, while Scottish Television closed at 499p, up 17p.

Analysts said the link between the two might lead to a merger, as the ITV sector prepares for new rules on ownership, proposed by the Government, and develops new strategies for the introduction of digital terrestrial TV.

Scottish Television's largest shareholder, the Mirror Group, supports the agreement which would see its 20 per cent stake diluted to 16 per cent. David Montgomery, chief executive of Mirror Group, is to join the Scottish Television board, as will two Flextech executives.

"This is a strategic step, giving us a relationship with a leading broadcaster," said Andrew Flanigan, Scottish Television's finance director.

Flextech packages specialist programming for satellite and cable transmission in the UK. It has equity interests in and/or manages 12 channels, including Bravo and UK Gold. "This deal makes good financial and strategic sense," said Roger Luard, chief executive of Flextech. "It gives us a stake in a larger animal and means we are now very well-positioned."

If the deal gains shareholder approval, Scottish Television will win commissions worth a minimum of pounds 6m, over three years, from Flextech, and will also make mini-series for Hallmark, the greeting card and entertainment company that owns 10 per cent of Flextech.

The Mirror Group stake in Scottish Television has attracted much criticism in the City and, under the Government's proposals on media cross-ownership, the Mirror Group would not be able to raise the stake, described by a Mirror spoke-sman as "strategic".

Scottish Television said it plans to forge closer ties with Flextech's principal shareholders, US cable company TCI and telecoms company US West.