NEWS: Westcountry deal boosts Carlton

Carlton Communications’ acquisition of Westcountry TV last week has dashed most predictions of how the ITV map will look once the remaining takeover moves allowed by the Broadcasting Act have been made.

Carlton Communications’ acquisition of Westcountry TV last week has

dashed most predictions of how the ITV map will look once the remaining

takeover moves allowed by the Broadcasting Act have been made.

It also means Westcountry’s advertising sales contract will almost

certainly move out of TSMS into Carlton UK Sales.

Carlton grabbed Westcountry from under the nose of its ITV rival, United

News and Media, which had been the favourite to make the first

acquisition since further mergers became possible on 1 November.

This manoeuvre showed how far the big broadcasting suitors are prepared

to go in their quest to make ITV’s top table a cosier place to be.

‘This deal gives us a really clear picture of the cut-throat competition

between two of the UK’s top three broadcasting groups,’ one analyst

says. ‘It shows that neither is prepared to give an inch and blows apart

all the theories about which companies would acquire which.’

The first reaction to last weekend’s announcement was that a mistake had

been made. Lord Hollick, chairman of United, had been locked in

negotiations with Westcountry for the past month. He was hammering out

final terms when Carlton’s chairman, Michael Green, contacted

Westcountry’s four major shareholders with a no-strings counter-offer

some 10 per cent higher.

Westcountry does not have the allure of some of the better-looking ITV

licencees. Its share of advertising revenue is small and, this year, is

getting smaller. Its geographical location is hardly central and it is

saddled with an annual cash licence bid of pounds 8 million.

Sales are currently handled by United’s sales house, TSMS, on a contract

that does not expire until the end of next year, and the early

indications from Carlton are that the broadcaster is not prepared to buy

Westcountry out of that contract. However, sources suggest that TSMS

will be prepared to let Westcountry go as servicing a small client can

be relatively costly.

Carlton has agreed to pay pounds 85 million for the South-west

broadcaster, which made profits of just pounds 5 million last year on

advertising revenue of pounds 37 million. Analysts have failed to

identify cost-cutting opportunities at the tightly run station.

‘Westcountry is a successful company and we will build on its strength,’

was as far as Green was prepared to go in explaining his move. The

region has certain demographic advantages: it is one of the fastest

growing in the UK and enjoys a large holiday population which is not

adequately represented on the Barb panel. But these arguments have

failed to hold much water with agencies in the past and any improvement

is certain to be modest. What is important for Carlton is that it

shatters United’s dream of creating a true South of England region

including its existing franchises for Meridian and Anglia.

Edward Lloyd-Barnes, the director of IDK, says: ‘Carlton has fired the

starting gun for the process of takeover and rationalisation we’ve been

waiting for since ownership rules were relaxed.’

It has also shown the wisdom about which companies will win these

battles cannot be trusted. Of the companies most vulnerable to takeover,

only Border is in the position of attracting a single suitor. It is hard

to see any of the other licencees being interested in spending the

pounds 35 million or so necessary for the station whereas for Granada,

which already sells the region as an adjunct to its existing territory,

such a move makes perfect synergistic sense.

While United is favourite to complete a bid for the Wales and West

licencee, HTV, on the basis it already owns a 20 per cent stake and

would not want it to cede from TSMS, Carlton cannot be discounted. Its

acquisition of Westcountry might have taken Carlton’s share of all TV

revenue to around 23-24 per cent but, with Channel 5 expected to

increase the size of the advertising cake, the broadcaster still has

room to deal.

There is now the threat of similar competition on a number of other

deals. Granada remains favourite to take YTTV, for example, because of

its 27 per cent stake in its cross-Pennine competitor and, alerted to

the opportunistic nature of its other rivals, Granada may want to wrap

up that deal sooner rather than later.


ITV licencee revenue and share


Licencee          1996 Ad Rev pounds m    Share %    1995 Ad Rev Share

Carlton                  270              16.29            16.14

LWT                      196              11.81            11.06

Central                  262.5            15.83            16.01

Granada/Border           185              11.14            11.30

Yorks/Tyne Tees          172              10.36            10.67

Scottish                  82               4.93             4.77

Grampian                  19.5             1.17             1.16

HTV                       96               5.8              6.02

Meridian                 186              11.19            11.17

Anglia                   119.5             7.2              7.3

Westcountry               37.7             2.27             2.35

Ulster                    33               2.0              2.04

Source: Agency estimates



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