Granada dominates ITV

Granada Media is buying United News & Media's ITV franchises - Meridian, Anglia and HTV - giving it a clear lead in the battle for overall control of Britain's leading commercial network.

The £1.75bn ($2.63bn) package includes United's related television production and international distribution businesses.

ITV franchises - who will own what

Granada Media:

Granada, LWT, Yorkshire, Tyne Tees, Meridian, Anglia, (HTV?)

Carlton:

Carlton London, Carlton Central, West Country, (HTV?)

United keeps its 35% stake in Channel 5, valued at about £400m.

Regulatory requirements will force Granada to sell one of the franchises - almost certainly HTV, which is most likely to end up in the hands of Granada's main rival, Carlton Communications.

This will leave ITV dominated by just two companies - Granada and Carlton - with Granada in the stronger position to become the ultimate victor.

The competition authorities have ruled that no one ITV company may control more than 15% of the UK television audience.

Leader

Charles Allen, Granada Media chairman, said: "This deal increases our national footprint, strengthens our offering to advertisers and allows us to play a leading role in ITV."

I think its a good price for both sides

Charles Allen, Granada Media

He said he expected to begin talks with Carlton soon to discuss the sale of HTV - valued at about £350m - and that he also expected to sell off a 5% stake in GMTV.

"The way we would like to play it is that Granada Media and Carlton work in partnership and then we could get many of the benefits of working together," Mr Allen said.

Granada said a consolidated ITV would be able to accelerate its digital strategy and rapidly develop itv.co.uk and a family of themed channels.

Complementary

Granada said United's strength in children's, animation and wildlife programmes would complement its own strengths in drama, entertainment and factual genres.

It expects the combined business to generate savings of at least £30m ($45m) a year by 2002, while also producing "significant" revenue enhancing opportunities.

Of the £1.75bn Granada is paying, £1.25bn will be in new Granada Media shares issued to United shareholders on completion of the deal.

The remaining £500m will be paid in cash to United.

Merger plans scrapped

Last week, Carlton and United called off their proposed merger, which would have created the UK's biggest commercial television group.

The government had approved the merger plans a week earlier, but only on the condition that the combined group would sell one of its key television franchises, Meridian, within six months.

In a joint statement, Carlton and United said "the requirement to dispose of Meridian ... undermined the strategic rationale behind the merger and significantly reduced the benefits to shareholders".

When the government approved Carlton and United's proposal, it also cleared Granada's plans to take over either of its rivals.

The collapse of those merger plans then cleared the way for Granada to pick its target.

Predictable movements in share prices followed the announcement of Granada and United's deal, which is subject to shareholder approval.

At 1010 GMT, Granada had risen 4.6% (585p to 612p), United had fallen 9.8% (945p to 852.5p) and Carlton had dropped 6.5% (823.5p to 770p).