Bid fever again takes a hold on the City

Dawn raid lifts Granada stake in Yorkshire-Tyne Tees to 24%

NIGEL COPE

Takeover fever hit the television sector again yesterday after Granada, headed by Gerry Robinson, caught the market off guard with a dawn raid on Yorkshire-Tyne Tees Television, best known for Emmerdale Farm and Darling Buds of May.

Shares soared across the sector after Granada, the television and catering group which only last month completed the pounds 3.9bn takeover of Forte, started buying shares in Yorkshire at pounds 10 against the previous evening's pounds 8.67 close.

Granada owned a 14.9 per cent stake in Yorkshire but has boosted its direct holding to 19.9 per cent. It has also acquired a further 3.9 per cent stake through a joint venture with Lazard Bros merchant bank.

Granada's chief operating officer, Charles Allen, said it had "no present intention" of making an offer for Yorkshire Tyne Tees though it reserved the right to make a bid if another party entered the fray.

While Granada cannot make a bid until the Broadcasting Act is passed, analysts said the stakebuilding represented a stepping stone towards a full merger between the two. Granada and Yorkshire work closely together through the joint selling of airtime and of programming to overseas markets. "There's a good relationship between us," Mr Allen said.

The logic of any merger would be based more on programming expertise than the cutting of costs which have already been slashed since the allocation of the ITV franchises in 1992. Another benefit would be advertising synergies. It would give Granada a monopoly of television advertising in the North of England.

Antony de Larrinaga, media analyst at Panmure Gordon said a merger would be a good fit. "This shows that Granada is very serious."

Granada's increased stake makes it difficult for a rival to strike while it continues the process of disposing of Forte's luxury hotels. It has marked its territory, warning others off.

Others interpret the raid as a deliberate spoiling tactic to damage last week's proposed merger between MAI, which owns the Anglia and Meridian franchises and United Media, owner of the Express newspaper titles.

The raid immediately threw the spotlight on other media companies such as Carlton and MAI which are also jockeying for position the sector. Some analysts suggested that Carlton would make a move on MAI. MAI is also tipped for possible action. It has a 14 per cent stake in Yorkshire and is known to be an admirer of the franchise. It acquired its 14 per cent stake for pounds 5 a share in 1994, so its value has already doubled.

Louise Barton, media analyst at stockbroker Henderson Crosthwaite, said: "There has to be some re-adjustment of portfolios in the whole sector. There are just too many blocking stakes in other companies."

A spokesman for one television group said: "This whole story about consolidation of the ITV franchises has a fair way to run. This is just the beginning."

Television companies have been moving themselves into position ahead of the new Broadcasting Bill, expected to come into effect next January. Under current cross-media ownership rules, a television company can own two independent television companies plus up to 20 per cent of another newspaper group or television franchise.

The new law will allow television and newspaper groups to own what they like as long as they do not exceed 15 per cent of the total viewing audience or readership. The new Act should be in place from next January.

Currently Granada controls just over 11 per cent of the viewing audience. A full merger with Yorkshire would increase that share to 11 per cent, still within existing guidelines.

But Carlton may run into competition problems if it decided to enter the fray.

With its Carlton and Central franchises it has a stake of 9 per cent. If it absorbed Yorkshire it would still be within the viewing limits but would control almost 25 per cent of the advertising market.

Comment, page 23

The ups and downs of Yorkshire TV

Early hopes.

1992. Wins ITV franchise with ambitious pounds 38m bid, but is criticised for paying too much. Company is on a roll with successes such as Darling Buds of May.

Later that year Yorkshire TV's ambitious chief executive, Clive Leach takes over Tyne Tees TV, bringing the two broadcasters back together for the first time since the Independent Television Commission forced a separation in 1982.

The problems soon start

By now YTT is paying pounds 1m a week to the Treasury just for the right to broadcast. The strain starts to tell. Then another bombshell drops: Yorkshire Tyne Tees has been selling more advertising airtime than it can broadcast. Warns that huge repayments to advertisers will push YTT into loss. Dissatisfied shareholders, including LWT and Pearson, look for scapegoats.

Management Upheaval: enter "the Pink Panther"

1993. The over-selling debacle takes its toll and four directors depart including Clive Leach who is ousted amid acrimonious scenes.

Early 1995 and Bruce Gyngell takes over as chief executive. A flamboyant Australian, Gyngell famously received an apology from Margaret Thatcher when his TV-Am lost its franchise. Nicknamed "the Pink Panther" due to his preference for pink shirts and rose tinted walls which he says encourage positive thinking. Exercises on a trampoline in his office.

Enter Granada

A shuffling of share stakes sees Granada pick up a 14 per cent stake in YTT as a result of its takeover of LWT. A year later MAI buys Pearson's 14 per cent stake. Granada and YTT develop a close relationship, working together on the selling of advertising and programmes.

1996. Fresh from its bloody pounds 3.8bn takeover of Forte, Granada stages dawn raid on YTTV shares, increasing stake to 19.9 per cent. But the drama is not yet over. Carlton may also take a tilt at Yorkshire but may run into market share problems. MAI, which last week announced merger proposals with United News and Media, may also be interested.