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Granada sets IPO, eyes bid
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June 26, 2000: 9:15 a.m. ET
Media arm to raise $2.2 billion, generate funds for acquisitions
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LONDON (CNNfn) - Granada Group PLC, Britain's biggest hotel operator, on Monday announced plans to sell up to 20 percent of its media unit in an initial offering to raise as much as £1.5 billion ($2.2 billion) - funds that the newly listed media player could then use to expand by acquisition.
The new Granada Media, with leading positions in U.K. commercial broadcasting and TV program making, will offer as much as 20 percent of its shares to institutional investors in Europe, the United States and Canada. It said the sale would value Granada Media at between £5.6 billion and £6.3 billion.
Granada last month agreed to merge with Compass Group PLC, the world's second-largest food service and contract catering company, and said it would then split the enlarged company's hospitality and media interest into two entities. In January it had declared its intention to scupper a deal between Carlton Communications PLC (CCM) and United News & Media PLC (UNWS) with a bid of its own that would form a dominant company in U.K. commercial broadcasting industry.
Charles Allen, executive chairman of Granada Media, played down the prospect of a hostile bid for its rivals depending on the outcome of a competition authority investigation.
"We're interested in buying Carlton's non-television assets, and United's non-television assets or we could bid for the totality or media assets... depending on the outcome of the review" Allen told CNNfn.
Britain's Competition Commission has investigated the possibility of a three-pronged merger and has passed on the its recommendation to Trade Secretary Stephen Byers, who is expected to give conditional clearance for the three main Independent Television (ITV) companies to reduce to two, but any one of the deals is likely to require some assets to be sold off to fall in line with broadcasting legislation.
 The Competition Commission has been looking at reforming rules that prohibit any company from raising its share of TV advertising revenue above 25 percent. The commission cannot, however, change a Broadcasting Act rule that restricts audience share to 15 percent.
In any event, consolidation is expected to whittle down the number of ITV companies to just one -- a move Allen sees as likely in 2002 or 2003 after the next British election when a new Broadcasting Act comes into effect.
After the demerger, Granada Media will operate regional U.K. TV franchises in four of the 15 areas that comprise Britain's main commercial television network, and will be Britain's largest television production company, making hit programs such as "Coronation Street" and "Blind Date". The business will also contain Granada Group's Internet assets and its 50 percent stakes in U.K. digital pay-TV broadcaster ONdigital and TV rentals operator Box Clever.
"This offering gives investors the opportunity to benefit from a pure media company and will enable Granada to demonstrate the hidden value of our business," said Allen, executive chairman of Granada Media, who said the company was well placed to take advantage of "exciting changes taking place in the global media market."
Granada said it expects the new company's shares to be included in the London exchange's benchmark FTSE 100 index and the pan-European FTSE Eurotop 300. The company plans to sell 261 million new shares at a price  between 465 pence and 525 pence.
Shares in all three media companies rose slightly in midday trading in London on Monday. Granada rose 0.3 percent to 650 pence, Carlton Communications climbed 0.7 percent to 858.5 pence and United News advanced 0.9 percent to 912 pence.
Granada named Lazard Brothers, ABN Amro and CSFB as joint global coordinators and joint bookrunners for the offer. Deutsche Bank and Schroder Salomon Smith Barney are co-lead managers. 
--from staff and wire reports
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