Elstein calls for ITV sales house sell-off and 200 job cuts

LONDON – Former Five chief executive David Elstein has hatched an ITV takeover strategy that would see both sales houses spun off, and a new management team replace Michael Green and Charles Allen of Carlton and Granada.

The Competition Commission is currently investigating the merger and is set to report its findings to the Department of Trade and Industry on August 26. The DTI will then take around 20 days to reach a final verdict.

It is widely accepted that the merger will be given the green light , but what is not yet clear is what anti-competitive conditions will be imposed.

Carlton and Granada have opposed any merger agreement that is conditional on their two sales houses not being allowed to combine. However, Elstein believes the merger could still work, and achieve cost savings, without keeping the sales house.

In a report for media consultancy Enders Analysis, he said: "Double divestment is a perfectly viable and logical scenario if that's what the Competition Commission wants to do. If ITV want to reject it, it would be a Quixotical thing to do."

He also believes the combination could help achieve his aim to boost profits by £100m by almost halving the number of staff.

"There are benefits from divestment which nobody takes into account like finally an ability to get control of those over-manned sales, which is quite difficult when they are all your direct employees – or at least it's proved to be beyond the power of Carlton and Granada to get them under control," he said.

Elstein believes he can reduce costs by as much as £20m by slashing the team from 450 to 270 and that it would be more cost effective to spin off the sales houses than to merge them.

If competition authorities approve a merger of the sales houses it is likely to have conditions attached to prevent the company from forcing up the price of airtime, or at least appease opponents of the deal.

The commission has suggested two possible solutions. The first proposal would see a minimum amount of ITV's airtime auctioned off each year to a third party, which would then be sold to a secondary market.

The second would allow advertisers to renew share deals, but based on the same terms as previously agreed. Advertisers would also be allowed to reduce the number of ads shown if ITV's share of viewers decreased, without losing their discounts. Share deals give advertisers discounts over a period of time if they agree to spend a certain amount of money.

Elstein also proposes that Granada reduce the amount of programming it makes for ITV, and commissions more from independents as its in-house production firm "drains cash".

A new management team would please shareholders in Carlton and Granada, who are currently opposed to Green and Allen running the merged ITV as chairman and chief executive respectively.

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