ITV rejects Branson merger offer

Board doesn't see any 'strategic logic' to making deal

ITV's board has unanimously rejected NTL's Richard Branson-fronted £5 billion ($9.5 billion) cash-and-stock merger offer, saying there is "no strategic logic" or financial upside to the deal for ITV shareholders.

The board, which met late Monday, concluded that the merger offer from cable group NTL "materially undervalued" Britain's biggest commercial broadcaster, according to a statement issued to the stock exchange Tuesday.

NTL's bid — put forward last week — valued ITV at £1.22 ($2.30) per share, with £1.05 ($2) in cash and the balance in new NTL shares. It fell short of the £1.35 ($2.56)-per-share price that satcaster British Sky Broadcasting paid Friday to take a 17.9% stake in the broadcaster.

"The board of ITV met (Monday) to consider this proposal, which had been thoroughly analyzed by ITV's advisers. The board gave it detailed and careful consideration and unanimously decided to reject (it)," ITV said.

The board added that it could not consider anything other than an all-cash offer, given NTL's already significant leverage. The cable group would have had to nearly double its debt load to £10 billion ($19 billion) to finance the ITV deal.

"The board feels unable to recommend to ITV's shareholders that they should take NTL stock as part consideration for their ITV shares," ITV said. "Whereas there is obvious appeal to NTL in gaining control of ITV's substantial and successful business, from ITV's perspective there is little, if any, strategic logic for ITV to combine with NTL."

NTL said it would consider its options, in view of ITV's decision.

"ITV has made no effort to engage in further discussions with NTL since that initial approach. NTL is considering all of its options in light of these developments," the company said.

The move comes as U.K. media regulator Ofcom said it has invited ITV and BSkyB to make initial submissions to an investigation into whether Sky's £940 million ($1.8 billion) stake in the commercial broadcaster constitutes a "change of control." The process is expected to take six weeks.

Under U.K. competition law, the satcaster can own up to 20% in the commercial broadcaster. However, if this stake triggers a change in the balance of control of ITV, regulators can take further action.