ITV rejects Branson merger offer

Broadcaster's board doesn't see any 'strategic logic' to deal

ITV's board unanimously rejected NTL's Richard Branson-fronted ?5 billion ($9.5 billion) cash and stock merger offer this past week, saying there is "no strategic logic" or financial upside to the deal for ITV shareholders (HR 11/22).

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 made up 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 ... 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 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 will consider its options in view of ITV's decision.

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."

Under U.K. 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 action.