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TV firms in $12.6B deal
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November 26, 1999: 5:25 a.m. ET
Carlton and United News to merge; regulatory barriers likely
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LONDON (CNNfn) - Britain's Carlton Communications and United News & Media unveiled plans to merge in a 7.8 billion pound ($12.6 billion) stock swap Friday, creating Britain's biggest commercial television company.
The deal, structured as a merger of equals, could require substantial sales in order to pass the scrutiny of regulatory agencies.
Carlton shareholders will own 52 percent of the new company, with United (UNWS) investors owning 48 percent. Carlton chairman Michael Green will chair the enlarged company, while United chief executive Clive Hollick will take the same position in the new company.
"Bringing our businesses together will strengthen ITV (Independent Television), contribute to the success of digital terrestrial television and boost Britain's television production base. The logic of the merger is compelling," Michael Green said.
Both companies operate regional franchises in Britain's Independent Television network, in addition to owning a collection of other media assets including the Express and Daily Star newspapers. They also hold substantial businesses in the United States and a 50 percent stake in OnDigital, the digital television service equally owned by Carlton and Granada.
The combination of Carlton's TV interests in London, the Midlands and the southwest of England with United News's Meridian, Anglia and West country franchises will raise regulatory concerns.
Under current rules, no single Independent Television company is allowed to control more than 25 percent of national television advertising revenues -- a limit the new group will breach with 36 percent. But the Office of Fair Trading has said it plans to review those rules.
There is also a limit of 15 percent on total TV audiences allowed by any one company. The new combination is likely to scrape just under this.
The two companies plan to sell several of their non-core businesses, including Carlton's Technicolor video duplication division and its products division. United Advertising and Periodicals non-core interests of United's Miller Freeman publishing business will also be sold. Analysts said the sales could raise some 2.5 billion pounds over the next 12 to 18 months.
It also intends to float its business-to-business Internet interests on Nasdaq next year.
The combined company, which had 1998/99 pro forma sales of around 4 billion pounds, expects cost savings of about 40 million pounds a year.
The deal will make the enlarged firm a more powerful competitor to Granada (GAA), currently Britain's largest commercial television company.
Investors appeared to welcome the deal Friday. Carlton shares soared more than 10 percent to 612 pence, while United shares rocketed more than 9 percent to 813.
-- from staff and wire reports
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