Furious Carlton warns Allen's head will be next on the block

Carlton sources warned last night that the scalp of Charles Allen, Granada's chairman, would be next after Granada failed to back Carlton's chairman, Michael Green, in a showdown with shareholders.

Mr Green was pinning his hopes of surviving shareholder demands to step down as chairman-designate of the merged Granada-Carlton on strong support from the Granada board, which met last night to consider the unprecedented situation. Instead, Granada directors sided with shareholders and abandoned Mr Green.

Sources close to Mr Green insisted that the leading rebel shareholder, Fidelity, actually wanted both men out of the merged group, which will create a single ITV company for the first time. Mr Allen is the chief executive-designate of the enlarged business.

The insiders said that by not standing up to shareholders this time, Granada would not be able to resist investor pressure, "when they come back for Charles [Allen]".

Earlier yesterday, divisions between the two companies were already apparent, as Granada stated that shareholders had never called for Mr Allen's departure, while Carlton said that Fidelity's original plan was to get rid of both men.

By trying to publicly undermine Mr Allen's position, it is thought that Mr Green revealed a desire to "take Charles Allen with him if he has to go". Media executives say that the two men "hate" each other.

Investment community sources confirmed that, in its first meeting with Carlton's senior non-executive director, Sir Brian Pitnam, and his Granada counterpart, Sir George Russell, on 8 October, Fidelity had floated the idea of a "bullet for both Michael and Charles". As the fund manager got other shareholders together to mount a rebellion, the agenda became to oust Mr Green only.

Despite siding with shareholders and apparently getting their backing, Mr Allen's position is not reckoned to be safe in longer term, not least because the merged ITV is quite likely to succumb to a bid.

Mr Green's more volatile and autocratic personality, together with his breaches of corporate governance codes in his proposed his role at the single ITV, made him the more obvious target for shareholders. More of the blame for ITV's recent disasters, include the over £1bn wasted on the failed ITV Digital pay-TV venture, was put on Mr Green. Also, it would be disruptive in the extreme to have to put in place new people for both top jobs at the same time, while the merger has not even completed yet.

For his part, Mr Allen has been credited with steering the Carlton-Granada merger brilliantly through regulators. Earlier this month, the deal cleared on terms far more favourable than expected. Mr Allen has also proved himself a good integrator of acquired businesses.

But Mr Allen has not escaped criticism for ITV's woes and many in the City reckon he has a year or 18 months to prove his detractors wrong. Shareholders may now demand Mr Allen reduces his two-year contract to one year before becoming chief executive of ITV plc.