ITV mulls merging with two U.K. rivals

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Commercial broadcaster ITV is thought to be considering a radical merger with Channel 4 and Five, creating a single commercial broadcaster in what would be the biggest shake-up in the history of U.K. commercial television.

In a move that underscores ITV's anxiety about the future of U.K. broadcasting, company executives reportedly have outlined the proposal to the government as one of several possible outcomes aimed at securing its future, according to a report Wednesday in the Media Guardian.

Executive chairman Michael Grade will unveil ITV's full-year financial results next week and is expected to provide shareholders with a rescue plan that includes redundancies, the sale of noncore assets and a cut in dividends.

The merger would require major regulatory consideration and amendments to broadcasting legislation designed to promote competition. But it would allow the organizations to save millions of pounds from the merging of back-office functions as well as global program sales and licensing operations.

The move would face opposition from commercial rivals including British Sky Broadcasting, which owns 17.9% of ITV and is its biggest shareholder.

It is not known what Channel 4 and RTL-backed Five would make of such a proposal, even if it did win government favor. Under CEO Dawn Airey, Five has been pursuing a merger opportunity with publicly owned Channel 4, but the option has been rebuffed by Channel 4 CEO Andy Duncan, who instead is pursuing shared partnerships with BBC commercial arm BBC Worldwide.

If it exists, the merger proposal would be an indication that ITV management believes time is running out for Britain's biggest commercial broadcaster.

ITV1's advertising-revenue forecast for the next three years is down 20% year-over-year. The stock is trading at an all-time low of 22 pence (32 cents), compared with about 76 pence a year ago, valuing it at less than £1 billion ($1.4 billion).

Since taking office two years ago, Grade has focused a strategy around building ITV's production assets and urging regulators — with mixed results — to diminish its public-service obligations. (partialdiff)
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