OFT to limit ad sales in TV mergers
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Your support makes all the difference.SIR BRYAN CARSBERG, the Director-General of Fair Trading, is set to throw a spanner in the works of Granada's pounds 670m bid for LWT by recommending a strict limit on the amount of advertising any one company can sell.
The ruling, which is expected early this week, is likely to recommend that if Granada wins its bid for LWT it should be obliged to give up LWT's lucrative pounds 200m-a-year contract to sell the airtime of Yorkshire Tyne-Tees.
The five-year contract is worth pounds 1m a year in profits to LWT and saves YTTV about double that in costs. It is believed that Granada would have to pay compensation of up to pounds 10m to YTTV if it were forced to terminate the contract.
Greg Dyke, managing director of LWT, said that the deal struck between LWT and YTTV was beneficial to both sides. 'Neither of us want it unscrambled,' he said.
However, Granada, which is headed by Gerry Robinson, appeared unconcerned, arguing that it was always clear that there would have to be a restructuring of the way ITV advertising airtime was sold following Granada's bid for LWT and Carlton Communications' takeover of Central TV, which sells its airtime jointly with Anglia.
Sir Bryan's recommendation is designed to prevent a monopoly in the sale of advertising airtime developing among a few TV companies.
The Takeover Panel, the City watchdog that regulates bids, has recognised the importance of Sir Bryan's deliberations by stopping the clock on the takeover timetable to take account of the issue. It has ruled that 'day 39', which signals the start of the three-week bid battle, will be two days after Sir Bryan's ruling is published. Both sides have denied asking for the extension.
LWT was facing pressure over the weekend to declare the identity of the North American party - said to be US arbitrageur, Warburg Pincus, which already holds 7 per cent of LWT - to which it is allegedly talking. City anaylsts say that the supposed deal, in which the American group would take a stake of just under 30 per cent, is impossible to transact.
They point out that under the Broadcasting Act, non-European companies are still prevented from owning more than 20 per cent of a UK broadcaster. Moreover, any deal involving negotiations with LWT's management would make the management, which holds 10 per cent of LWT, part of a 'concert party' with the American firm. Under the City takeover code, if members of a concert party buy more than 30 per cent of a company they have to launch a full bid.
It is understood that LWT has approached a number of foreign companies to see whether they would be interested in purchasing a stake in the group. Under takeover rules, the TV company have only seven days after the takeover clock starts ticking again to come up with a deal or no action will be allowed until Granada's bid either succeeds or lapses.
Jeremy Warner, page 2
(Photograph omitted)
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