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Carlton, United end talks
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July 21, 2000: 6:56 a.m. ET
Watchdog's conditional merger approval wrecks UK deal; more talks in progress
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LONDON (CNNfn) - British television companies Carlton Communications PLC and United News & Media PLC called off their planned $7.8 billion ($12.6 billion) merger Friday, after the U.K. antitrust regulator last week said it would approve the deal only if United sold one of its most prized TV franchises.
"The requirement to dispose of Meridian... undermines the strategic rationale behind the merger," the companies said. Meridian is a regional TV station with a license to broadcast to the prosperous south coast of England. Merging United with Carlton would have created a company with regional franchises covering most of southern and central England and Wales.
United said it was in talks with other parties. Although it didn't name any other companies, rival U.K. TV broadcaster Granada Media (GME), has made it clear it is interested in buying either United or Carlton, or parts of either company.
Carlton (CCM) shares fell 1.3 percent to 809 pence and Granada dropped 3.8 percent to 585 pence in London Friday, while United (UNS) rose 2.7 percent to 969.75.
"Carlton could still pick up two television licenses, and Granada could get the Meridian license from United," Gareth Thomas, an analyst at Commerzbank, told CNNfn.com. United's may also be discussing the sale of its stake in Channel 5, the U.K.'s newest nationwide free-to-air TV station, to continental European broadcaster RTL Group, he said.
Conditional approval
The government last week told Carlton and United they could go ahead with their merger on the condition United sold Meridian. Its ruling effectively gave the green light Britain's three main commercial television companies - Carlton, United and Granada - to consolidate, leaving two companies.
At stake is control of Britain's most watched television channel, ITV - a terrestrial commercial network consisting of a number of regional franchises, most of them controlled by the three players.
Even after the planned merger fell through, "We still believe that there will be two broadcasters with a balanced regional television portfolio," Carlton spokesman David Cameron told CNNfn.com. "How we get there, I can't say, but we are still talking."
Granada Media declined to comment on what contact it had had with Carlton and United. Under U.K. competition rules, it must make its intentions clear to the London Stock Exchange within 17 days.
Under the current rules governing media ownership in the U.K., no single ITV company is allowed to control more than 25 percent of national television advertising revenues, and no company's share of the overall national total TV audiences is allowed to rise above 15 percent. A combination of United and Carlton would have only just complied with the second condition.
Analysts have said Granada is unlikely to bid for Carlton because it already owns one London TV franchise. Its London station has the license to broadcast to the capital at the weekend, while Carlton's franchise has the Monday-to-Friday license.
RTL, which plans to list its shares in London next week, could not immediately be reached for comment. Its main shareholders include Germany's Bertelsmann AG, Britain's Pearson PLC and Belgium's Groupe Bruxelles Lambert SA. 
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