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LWT attacks Granada share record: TV company urges shareholders to reject pounds 638m bid on basis of poor market performance

Gail Counsell,Business Correspondent
Monday 20 December 1993 00:02 GMT
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LWT fired its defence salvo against Granada yesterday, accusing it of making out a 'thin and unconvincing' argument for its pounds 638m offer.

The defence document posted by the television company to its shareholders concentrates on criticism of its rival Granada's record in an effort to persuade them to reject the bid.

LWT's shares were among the four best-performing in the 811- strong All Share Index during the four years leading up to the bid, while Granada's ranked only 247th, it says. A pounds 100 investment in both for roughly the same period would have turned into pounds 755 for LWT, but only pounds 176 for Granada, it argues.

'We're saying Granada paper is nothing like as attractive as LWT paper, and we're telling shareholders: 'We've done really well for you in the past and we want to go on doing so in the future',' Sir Christopher Bland, LWT's chairman, said.

But Gerry Robinson, Granada's chief executive, dismissed the argument. 'I could pick a different period and show we had outperformed them - especially if I ignored how their share price has moved since we bought our 20 per cent stake.'

LWT's argument is that it is a better long-term investment than the conglomorate, which draws only 21 per cent of its profits from its Granada TV franchise. There is 'little apparent logic' to Granada's various interests, while rental, which generates more than half the company's operating profits, is a business in long-term decline, the document says.

LWT also insists that accepting the share offer would result in lower dividend income for shareholders, pointing out that Granada's dividends per share this year are 10 per cent lower than in 1987.

LWT made no profit forecast but said it would provide one in the new year.

The document refers in only the briefest terms to a possible LWT bid for its fellow ITV company Yorkshire-Tyne Tees.

LWT and YTT were forced last week by the Takeover Panel to reveal they were exploring a deal. LWT already has 14.2 per cent of YTT. But YTT's mounting difficulties - it faces a loss this year of up to pounds 9.5m - have led to doubts about the wisdom of the deal.

Sir Christopher yesterday said the groups were still talking, but added: 'It's a complicated process.'

The document makes no mention of a possible link-up with Anglia, another regional ITV company. Anglia had been rumoured as a possible buyer of the Tyne Tees licence - no television company can own more than two licences - in the event of an LWT-YTT bid.

The suggestion is that this could have led to the formation of a giant LWT-Anglia-Yorkshire-Tyne Tees company if the ownership rules were further relaxed.

LWT's directors, who control 6.9 per cent of the shares - the management control a further 3.1 per cent - have said they will reject the offer, which is open until 29 December.

The document discloses that nine LWT directors sold 5.3 million shares last August at a price of 458p per share. The Granada bid currently values each share at around 618p, although the cash alternative is only 528p.

A Granada spokesman said: 'That rather undermines their claim that the offer is too cheap.' But Sir Christopher said most of the sales were to repay loans taken out to buy the shares at the time of the franchise bid.

The document hints that shareholders may in due course find other bidders willing to pay a higher price than the 32 times earnings on offer from Granada. It points out that the American studios group Paramount is currently the subject of bids worth 38.8 and 41.1 times earnings, and observes that from next year European companies will be allowed to control an ITV franchise. It also says that the rules preventing newspaper groups from buying ITV companies look likely to be relaxed.

The document also reveals that all nine executive directors, including Sir Christopher Bland, executive chairman, and Greg Dyke, chief executive, are employed under service contracts terminable with two years' notice, and worth pounds 796,500 a year in total.

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