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Granada seals $2.7B TV deal
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July 28, 2000: 6:10 a.m. ET
UK firm seeks to mop up control of commercial TV broadcasting
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LONDON (CNNfn) - Granada Media PLC took a decisive step toward dominating the future of U.K. television broadcasting Friday, agreeing to buy the broadcast units of rival United News & Media PLC for £1.75 billion ($2.7 billion).
The deal is a blow to Carlton Communications PLC, the third of Britain's three leading commercial TV operators, which this month called off their merger with United after the U.K. competition authorities required the companies to make divestments.
Granada had cast a shadow over the accord between Carlton and United News by threatening to bid for either of the two merger partners. Between them, the three companies control the most important regional franchises in the independent television network, Britain's main commercial television channel.
United's (UNWS) shares tumbled 12 percent to 830 pence Friday, on disappointment there was to be no outright bid for the firm. The company has made a number of divestments in recent months, having also agreed to sell its Miller Freeman publishing units.
Carlton (CCM) sank 5 percent to 782 pence, and Granada Media [LSEGME] jumped 5 percent to 620 pence.
Granada Media was created when Granada Group PLC (now Granada Compass PLC) carried out a partial divestment of its media interests, listing its media unit on the stock market on July 11.
The newly listed company agreed Friday to pay £1.75 billion in stock and assumed debt for United's broadcasting, program production and international distribution businesses. United shareholders will receive 213 million new shares in Granada Media, or 0.42 Granada Media shares for each United share they own. The buyer will also assume £500 million in debt.
The purchase will give United shareholders 12.5 percent of Granada Media. Granada Compass (GCP) continues to own 70 percent.
Consolidation pressure
Pressure on free-to-air broadcasters from new broadcasting platforms such as cable, satellite and digital terrestrial broadcasting, has prompted the regional players to consolidate. The latest deal leaves two dominant players in Britain's free-access commercial television network. Eleven of the Independent Television (ITV) network's 15 regional franchises will now under the control of either Granada Media, which will initially have eight, and Carlton, with three.
Analysts have predicted that eventually there would be only one ITV operator, as the incentive to consolidate grows in line with the increasing influence of other media.
"This deal delivers on the strategy we outlined during our IPO on every front," Granada Media Chairman Charles Allen said in a statement. "It increases our national footprint, strengthens our offering to advertisers and allows us to play a leading role in ITV."
Granada said in a statement it would take the necessary steps to make sure the deal complies with U.K. broadcasting law. No company is allowed to have an audience share of more than 15 percent, but the enlarged Granada Media would be nearer to a 20 percent share. Analysts said Granada Media would probably resell some parts of the United business, probably to Carlton. 
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