Scottish Media buys Grampian for pounds 105m

Scottish Media Group yesterday announced a pounds 105m deal to buy Grampian Television, heightening expectations that the few remaining independent Channel 3 companies, such as HTV, would be taken over before the end of the year.

Scottish, which offered Grampian shareholders cash or new Scottish Media shares, will make substantial cost savings. City analysts suggested that up to 50 jobs may go from Grampian's workforce of 200.

Scottish would not confirm the number of redundancies and said the formation of a Scottish Parliament would create job opportunities as the company would set up studios in Edinburgh.

Calum MacLeod, non-executive chairman of Grampian, and Donald Waters, chief executive of Grampian, will join the Scottish board. Mr Waters will continue in his current capacity until his retirement at the end of the year. It is thought he will not be replaced.

Scottish is to transfer all its programme production to Grampian's Aberdeen studios, a move which will cut overheads by reducing the group's dependence on freelance and external facilities.

Andrew Flanagan, managing director, said the deal would provide advertising synergies between the two companies. He said: "We needed to get together to compete for advertisers on a pan-Scotland basis."

Of the five independently owned Channel 3 broadcasters, Yorkshire-Tyne Tees Television is likely to be swallowed up by Granada Group after the two confirmed on Monday they were in talks about a merger. A deal is expected in a few weeks.

HTV's share price leapt 10p to 316.5p yesterday on City expectations that United News & Media would launch a bid by the end of the year. According to Henderson Crosthwaite, United, which already has a 29 per cent stake in HTV, would pay around 420p a share for the company.

Lord Hollick's company is forbidden from paying less than that until October, a year after it upped its stake in HTV at a cost of 420p a share.

United may act swiftly to prevent other predators taking an interest. Although Carlton Communications would have difficulty taking control of HTV while United continues to hold a stake, it has established an ideal platform for a takeover of HTV with its purchase last year of Westcountry Television.

While analysts said United could not afford to tread water for too long, they believed it may wait for the Independent Television Commission's decision on licence renewal before swooping. HTV pays the Treasury a hefty annual fee of pounds 22m and is likely to be granted a reduction which would affect its market value.

Analysts said a purchase of HTV would leave Border Television as easy prey for either Scottish or Granada, although Mr Flanagan said yesterday Scottish would prefer to expand by acquiring regional newspapers.

He said that while Border was "not a perfect bedfellow" and that all ITV companies were "healthily priced", there were significant opportunities in other media markets, and beyond Scotland.

Derek Terrington, media analyst at Teather & Greenwood, said Scottish was playing down talks of expansion within the terrestrial television sector. "Scottish wants to complete the set by buying Border," he said.

The Labour MP for Aberdeen Central, Frank Doran, yesterday urged Margaret Beckett, the President of the Board of Trade, to refer the Scottish deal to the Monopolies & Mergers Commission.