Shares in ITV groups Granada and Carlton soared today after speculation that their planned £3.8bn (€5.5bn) merger could get the go-ahead with minimal strings attached.
The pair, which between them control 12 of the 15 ITV franchises, are awaiting an announcement later this week from Trade and Industry Secretary Patricia Hewitt on whether the tie-up is to be waved through.
While the British government is thought likely to approve the deal, it could force the pair to sell their advertising sales operations to allay fears that a merged broadcaster would have excessive power to ramp up prices.
Such an option could potentially scupper the tie-up but reports suggested today that the British government could opt for a compromise solution controlling prices without forcing the disposals.
Shares in the two companies leapt in morning trading today with Granada topping the FTSE 100 risers list, up 5% at 103p. Meanwhile Carlton led the second tier FTSE 250 Index with its shares trading at 181p – up almost 9%.
Commentators said the rise reflected optimism that the British government would stop short of ordering a sell-off.
It could agree to compromises such as auctioning off airtime or allowing advertisers to extend current contracts on the same terms with the right to reduce the amount of airtime if ITV’s audience share declines.
Selling off the two advertising houses could cut an estimated £55m (€79.1m) annual cost savings from the merger by as much as £20 million.
Kingsley Wilson, media analyst at Investec Securities: “Under a light touch scenario people could start factoring in incremental cost savings and feel safe that the merger will go ahead.”
Under the proposed tie-up Granada would take a 68% stake in the new dominant ITV company better placed to take on the might of satellite broadcaster BSkyB and the BBC.
Granada owns seven ITV franchises including Granada Television, London Weekend Television, Yorkshire Television, Tyne Tees Television, Anglia Television, Meridian Broadcasting and Border Television.
Carlton Television owns the licence in five regions – London & LNN, Central, West Country, HTV West and HTV Wales. Its content division has made programmes including Inspector Morse and Survivor.