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UK TV firm Granada buying Carlton for £1 billion

Britain's biggest commercial television group Granada Plc said on Wednesday it agreed to buy rival Carlton Communications Plc for just under £1 billion ($1.6 billion) in new shares.

Carlton shareholders will get 1.9386 new Granada shares and 0.1835 convertible shares for every Carlton ordinary share currently held, giving them 32 percent of the enlarged group.

The two firms, the main stakeholders in Britain's ITV commercial network, said Granada investors will also receive 7.225 pence in cash for every existing share -- a payout worth 200 million pounds in total.

The firms, struggling with falling audiences and advertising revenues, have held talks before, but never clinched a deal due to regulatory concerns that a full merger could give them too much power over the prices they charge advertisers.

Granada's Chairman Charles Allen will be chief executive of the new group, and Carlton's Chairman Michael Green will keep that title in the new company.

The two firms, which revealed they were in advanced merger talks last week, said they might spin off an advertising sales unit to meet regulatory demands.

Granada said they expected cost savings of £35 million per year at the one-off cost of £40 million by the end of the first full financial year of operations, excluding benefits from the combined ad sales force.

They believe a further £20 million in savings is achievable on full merger for the one-off cost of £15 million.

Granada shares were down 3.3 percent at 72-1/2 pence, while Carlton stock was hardly changed around 130 pence.

Granada also said on Wednesday it expected a satisfactory full year, "given current market conditions".

Carlton also said it expected a satisfactory full year.

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