ITV drama comes to an end

ITV, the UK-listed commercial television company, has rejected a revised bid from a private equity-led consortium, which has then dropped its interest in the target.

Apax Partners, Blackstone and Goldman Sachs Capital Partners had revised its offer by putting in place a cash alternative worth 44p per new share, or more than £1.6bn (US$2.78bn), if its buyout succeeded and investors had wanted to exit.

Under the original terms, the consortium had offered 86p per share and one new share in the acquiring company for each ITV share currently held. The bidders would invest £1.27bn in the acquiring company to receive 48% of its issued share capital and borrow £3.5bn to pay the original cash option to investors.

ITV said: “Fundamentally, all of these key elements were unchanged from the consortium’s previous proposal, save that the underwritten cash alternative had been increased so that the cash price, for shareholders who would not have wished to hold shares in this highly leveraged company, was increased from 120p per share to 130p per share [£5.37bn].”

ITV’s board said it was rejecting the offer because the new company’s leverage, at more than 7x 2005 Ebitda, would be “unduly risky for a business that operates in a cyclical environment and has high operational gearing”.

The board added that the cash price of 130p per share, representing a premium of 11% to the price of ITV shares immediately prior to the leak of the consortium’s approach, inadequately reflected the change of control inherent in its proposal.

The target said that for less than £1.3bn the consortium would be able to buy a 48% stake in a company whose pre-rumour market capitalisation had been £4.8bn.

The consortium followed this rejection by dropping its offer. It said: “In the light of the response from the board of ITV, the consortium has decided not to proceed further with its proposal.”

As a result, ITV said it would continue with its strategy of building a multi-platform, multi-channel digital company and return an initial £300m of capital to ITV’s shareholders and review its capital structure. ITV’s shares fell by about 5% to just less than 120p each on the news.

James Mawson