The news ends months of speculation about the future of ITV, which is struggling against the ad downturn and is currently without a chief executive having lost out to BSkyB in the race for Channel 5 chief Dawn Airey.
The network's former chief executive, Stuart Prebble, resigned following the collapse of ITV Digital, which cost the two companies over £1bn in cash and much credibility.
While ITV Digital was in administration reports emerged that Carlton and Granada had restarted merger talks. However, these reports were quickly quashed by Carlton chiefly because Granada had failed to offer a high enough premium for its smaller partner.
Under the terms of the deal, Granada will be the majority owner of the merged group with 68% of equity in the combined company and will receive £200m on completion of the deal.
Carlton shareholders will receive 32% of equity, which would increase to 34% in 2006 depending on the performance of the merged company's share price and on an agreed earnings target. Carlton will pay an unchanged final dividend for the year ended September 30 2002 of 5 pence per share.
News of the merger has been long anticipated after the government moved to sweep away broadcasting regulations, which prevented ITV being owned by one company.
The merged company will be headed up by Carlton chairman Michael Green who takes on the role of chairman of the new company, while Granada chairman Charles Allen will be chief executive. The two will be joined on the new board by three non-executive directors from each company.
Commenting on the announcement, Green said: "A single ITV is within sight. In a rapidly changing broadcast industry we need to combine to compete effectively. Delay is not in the interest of viewers, advertisers, stakeholders or the future of British broadcasting."
However, the companies have given no indication what will happen to the two sales houses. This will need to be clarified because many feel, including much of the advertising industry, that the two sales houses should remain separate to keep the cost of advertising on ITV competitive.
According to Allen said: "The proposed merger provides a clear route to a consolidated ITV. It would make ITV more competitive now, in an increasingly competitive market."
The news sent Carlton's shares up 13.94% or 14.5p to 127.5p, while Granada rose 11.88% or 7.75p to 74.25p.
If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the .
.jpg)
.jpg)