Granada to buy into Scottish Media Group

The control by the "big three" ITV companies of the national British television channel was reinforced yesterday when Granada Group agreed to pay £110 million for an 18.6 per cent stake in Scottish Media Group, the fourth-largest ITV company.

Although the move could lead to a full take-over bid, Granada said it was acquiring the shareholding from Mirror Group mainly to ensure that foreign companies did not hinder co-operation within ITV.

Scottish Media is involved in both broadcast and print media in Ireland. It recently increased its stake in the independent radio station Today FM to 22 per cent and last year bought the Leitrim Observer regional newspaper for £1 million. Foreign companies, including CanWest Global Communications - the Canadian broadcaster which operates TV3 and has a stake in UTV - and TF1, the French group, approached Mirror Group after it indicated it wanted to sell its stake in Scottish, which runs several ITV franchises, to concentrate on newspapers.

Disappointed bidders for Mirror's stake may attempt to buy the 18.6 per cent stake in Scottish held by the pay television group Flextech, which is thought likely to sell if it receives a good offer.

Granada is barred from buying the Flextech stake for six months because this would take its holding beyond 29.9 per cent, triggering a bid. It said it had no intention of making a bid, blocking itself under Take-over Panel rules.

Granada said this could change if a rival made a bid or acquired more than 15 per cent of the share capital. Mr Charles Allen, chief executive, said there was "nothing further we can do in the medium term but, over the years, this may be a useful bargaining chip". The key motive had been to avoid foreign involvement in ITV. "We have been trying to get ITV to work together and, if it fell outside ITV, other agendas might be introduced."

Mirror's year-end debt of £489 million has been reduced by about £150 million with the sale of the stake and its former headquarters at Holborn Circus.

The Scottish sale will produce a net gain of £47 million over the average price paid. It has to be approved by Mirror shareholders since Trinity has made a bid for the company. This has gone to the Monopolies and Mergers Commission.

Scottish shares closed 20p up at 865 1/2p, and Mirror closed 1 1/2p down at 209p.