ITV merger given go-ahead with no surprise conditions

LONDON - Trade and industry secretary Patricia Hewitt has given the go-ahead for the merger between ITV companies Carlton and Granada and their respective sales houses with some conditions imposed.

Carlton and Granada's respective sales houses will be allowed to merge on the condition that advertisers can renew their advertising share deals on the same terms as previous contracts.

The £4bn deal, which has almost doubled in value from the £2.6bn it was valued at when first announced last October, has not been given complete approval.

There is still one sticking point relating to the Channel Three regional licences and their airtime sales houses. This relates to the ITV firms in Scotland and Northern Ireland. Carlton and Granada have been given until November 7 to come up with a remedy for this problem.

Hewitt said: "They [the Competition Commission] conclude that the merger could be expected to operate against the public interest in relation both to the other Channel Three regional licences and to the future of competition for the sale of advertising airtime."

However, the thorny issue of whether or not the airtime sales houses should combine has been solved, with Hewitt giving the combination of the sales houses the go-ahead following the recommendation from the commission.

"With regard to the adverse finding on the future competition for the sale of advertising airtime, the secretary of state agrees with the Competition Commission inquiry that this can be satisfactorily addressed by the imposition of a system of contract rights renewals (the CRR) remedy and the appointment of an independent adjudicator to oversee the fair application of the mechanism for the period."

She added that a number of undertakings on how the process would be implemented would have to be put in place before the industry's annual negotiations began in November and December.

Another possible remedy that had been drawn up during the competition inquiry could have seen a portion of ITV advertising auctioned off to be sold to a secondary market.

The merger has faced a mountain of opposition over the last year, and the issue of the sales houses had been expected to be its undoing, because it would have created what some described as an ITV monopoly on TV advertising in the UK.

Carlton and Granada chairmen Michael Green and Charles Allen both opposed the idea of keeping the sales operations separate and said they would not go ahead with the deal if the sales houses could not be merged.

Former Five chief executive David Elstein caused a stir when he drew up an alternative proposal for ITV, claiming that that he could save £100m by combining the sales houses and cutting up to 200 jobs. He said he would also cut the amount of in house productions the network commissions from Granada.

This compared with Allen and Green's proposal, which promised savings of £55m if they are allowed to keep their sales houses, and £35m if they are not.

Allen's and Green's positions also looked to be threatened by an uprising among shareholders concerned about their motives for the deal and about whether they were the right people for the job.

The two were held largely responsible for the collapse of ITV Digital. However, scapegoats were made of Granada chief Steve Morrison and, later, Carlton's Gerry Robinson.

Shareholders were sceptical about the pay deals currently held by Green and Allen, who are both set to walk away with large severance payments if they leave the company. There have been suggestions that Green and Allen were trying to push the merger through so they could cash in on the deal and sell it on to a foreign media giant.

The merger has been largely welcomed by the industry because it is seen as good for UK broadcasting to have a third major player to compete with the BBC and BSkyB.

BBC director general Greg Dyke recently called for the government to support ITV to allow there to be "three gorillas" in UK broadcasting.

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