Carlton 'renegotiates merger'

UK media group Carlton Communications is reported to be talking to United News & Media about changing the terms of their proposed merger to reflect the big rise in Carlton's share price.

Carlton has also announced that it is planning to join forces with broadcasters in Germany, France, Italy and Spain to invest in internet and interactive television projects.

Carlton chairman Michael Green

The venture, which has yet to be finalised, brings Carlton together with Kirch, TF1, Mediaset and Telecinco. Between them, they broadcast to 300 million people.

Paul Richards, analyst at WestLB Panmure, said: "This is a great move and could well lead to further co-operation."

As regards the UK merger plans, Carlton's shares have outperformed United's by about 25% since the deal was announced in November.

Then, United was marginally the bigger of the two. Now, according to the Daily Telegraph, the companies are looking at an adjustment to make the proposals acceptable to shareholders.

Competition concerns

The merger has yet to be given regulatory approval. A decision by the Trade & Industry Secretary, Stephen Byers, is said to be expected in July.

Last month, the Independent Television Commission said the merger would require a major change in current legislation.

The commercial broadcasting regulator confirmed that it would break rules concerning how much market share any one broadcaster was allowed to control.

United chief executive Clive Hollick

And it said the rules would have to be changed so much to allow the merger to proceed that this might be viewed as unacceptable.

It also said it saw no "convincing case" for such a change, although it believed there might be a case for modifying some legislation.

The ceiling on advertising market share - currently 25% - would have to be raised to as much as 40%, it said.

The audience share limit of 15% would also be broken, and this would mean either Carlton or United must sell the 20% stake they each hold in ITN (Independent Television News).

The regulator said it was for the Competition Commission to decide whether the proposed merger should invoke an early review of the law.

Referral

In February, Mr Byers, referred the proposals to the Competition Commission, saying it raised certain concerns.

The issue over whether the rules should be relaxed to allow independent television companies to own a larger market share is being seen as crucial for the future of UK broadcasting.

The key argument is whether they will not be able to compete with overseas competitors if they not allowed to grow.

The biggest of the current ITV companies, Granada, is also trying to take over either Carlton or United as the industry's major players battle to secure UK domination.

Half-year results

On Wednesday, Carlton reported pre-tax profits down 85% at £26.9m in the six months to 31 March.

But the drop was largely caused by a £98m one-off investment in Ondigital, which Carlton jointly owns with commercial rival Granada.

Adding the item back in produces pre-tax profits up 3.6% at £171m.

This was better than had been forecast by analysts.