Pearson on the takeover trail in US

MATHEW HORSMAN

Media company Pearson is in talks with at least two television companies, as part of a pounds 100m-plus acquisitive drive into the US.

While the company declined to give details, it is believed both target companies are well-established independent producers, supplying the US and ex- port markets with television programming.

It is believed that any deal would include iron-clad guarantees that current management would stay with the company.

City speculation ranged from gameshow producers such as Mark Goodson to drama and comedy specialists such as Stephen Cannell Productions.

The moves are just the start of an extensive acquisition plan conceived initially by Pearson chief executive Frank Barlow and now led by Greg Dyke, the former head of LWT and the man now running Pearson Television.

A Pearson spokesman said: "It is no secret that we are interested in the US, and that we have targeted television production."

He confirmed that Mr Dyke was taking the lead in scouting out investment opportunities in the US.

But he cautioned that the talks were at a very early stage. "We have talked to many US companies, some of which are still in the picture, some of which are not. It is far too early to say whether a deal will be reached."

Pearson rejected as "way off beam" rumours in the City of a $100m price tag for one of the companies. The company spent pounds 175m earlier this year buying Grundy Worldwide, the international television producer that makes Neighbours, and bought Thames Television, the UK independent that formerly ran the London weekday ITV franchise, in 1992 for pounds 99m.

Fuelling the current acquisition binge will be a higher-than-expected demand for Pearson's 9.7 per cent stake in BSkyB, being sold through a global secondary offering underwritten by BZW and Goldman Sachs. Early estimates of raising about $500m have been revised upwards, following the sharp increase in the BSkyB price since the sale was first confirmed earlier this year.

BSkyB shares closed yesterday at 361p, up 10p, on the expectation, confirmed following the market's close, that they would be included in the leading FT-SE 100 share index. Pearson shares gained 9p to 639, on expectations of a higher price for the BSkyB stake.

The Stock Exchange announced yesterday that the stock would be included in the index from 18 September, allowing current futures contracts to expire. The sale by Pearson of most of its stake will mean that at least 25 per cent of BSkyB will be in the market, making it eligible for the index.

A total of 145.8 million BSkyB shares are to be sold initially in the global offering, to be priced on 14 September. If demand warrants, a further 21 million shares will be offered. Analysts estimate the gain (net of advisers' fees) might be as high as pounds 560m, more than enough to wipe out corporate debt. They also expect the company to use its leverage to finance an aggressive acquisition strategy.

But many are wary of Pearson's growth strategy, arguing that past acquisitions have been expensive and difficult to integrate. Moreover, the US TV production business has already caused severe problems for UK media companies, notably the disastrous 1988 purchase byTVS of MTM, responsible for the Mary Tyler Moore Show. The departure of senior creative management and problems in the syndication market soured the investment almost from the start. Thames Television also had a trying experience in the US, production market paying $65m for Reeves in 1989, only to write off the investment in 1992.

Derek Terrington, media analyst at Kleinwort Benson, said: "Pearson's TV strategy is still evolving, and it remains to be seen if buying TV production companies is really the best way forward."

Pearson said the company would not repeat the mistakes of the past: "There are many senior people here now who remember the TVS-MTM deal and who were at Thames when we bought Reeves. They won't make the same mistake again."