TV takeover plot builds into tale of suspense

NOT SINCE Ena Sharples (late of Coronation Street) lost her hairnet has commercial television seen such a kerfuffle. Even a year ago, a hostile takeover bid by one ITV company for another would barely have been conceivable, let alone possible. But rule changes approved by the House of Commons last week will, for a while at least, make it an everyday tale of TV folk, and it promises some sustained melodrama.

Unfortunately the script for the first of these bids, Granada's pounds 600m offer for London Weekend Television, has so far proved an uninspired one, with none of the strong language normally associated with hostile takeover fights.

Granada has stopped well short of attacking LWT's management record or expertise, choosing instead to concentrate on the perceived advantages of combining the two companies into a larger whole. Likewise, LWT's response has been so muted that Granada must surely believe it would secure LWT's agreement if it sweetened the offer a little. But if that is what Gerry Robinson, chief executive of Granada, thinks, he would be wrong.

There's a price at which any management has to bow out and recommend a bid, but it's not one Mr Robinson is willing to pay. Sir Christopher Bland, chairman of LWT, and his chief executive, Greg Dyke, are determined to fight to the bitter end; they'll try almost anything to see off Granada and we can expect the plot to liven up considerably here on in.

Executives at LWT are in the unusual position of owning a large chunk of the equity - about 10 per cent - thanks to the gilt-edged share option scheme they awarded themselves at the time of the franchise bid. The group's top 10 managers and producers receive more in dividend income each year than they do in salaries, and 25 of them are paper millionaires several times over.

So when they say 'don't accept the offer', they have to be taken a lot more seriously than most managements at the wrong end of a hostile takeover. With the value of their shareholding as well as their jobs to protect, they are putting their money where their mouth is. I suspect Granada is going to find this by far the most difficult and powerful of the arguments it has to contend with over the weeks ahead.

Tough and effective operator though Mr Robinson is, he's got a hard fight on his hands. The best thing that could happen from his point of view would be if LWT was foolish enough to attempt a poison pill takeover of the troubled Yorkshire-Tyne Tees, in which it already owns a 14 per cent stake, in an attempt to fend off his bid. I can think of no move more guaranteed to alienate shareholders. Despite this, I understand that some sort of deal with Yorkshire-Tyne Tees, possibly in conjunction with Anglia, another vulnerable TV company in need of protection, is now extremely close to fruition. LWT has had its due diligence people in there for at least a week now.

From this side of the fence, it's hard to see how LWT could justify a deal of this sort even with the promise of an eventual three-way merger with Anglia into a new 'super' TV station once the rules allow. LWT would try and present the choice in stark terms: either you opt for Granada, essentially just another dull and boring conglomerate, or you hold on for shares in a new super TV company with the promise of a suitably glamorous stock market valuation to match. No contest, Sir Christopher will argue. Well, maybe. The problem is that Yorkshire-Tyne Tees could well turn out to be black hole territory. When you go into a company known to be in a mess, it nearly always turns out to be in an even bigger one than everybody thought. In TV soap, however, nothing is too incredible, and it may well be that LWT is able to dress up its plan attractively enough to look a viable alternative to the Granada bid. After a dull start, this particular drama looks set to run and run.