Carlton Communications Plc, the London-based supplier of video and television services is making a recommended share offer for the advanced technology company UEI Plc. The offer is available in a variety of forms with UEI shareholders able to get 56 ordinary and 229 convertible redeemable preference shares, for every 100 shares they hold. The preference shares carry a fixed cumulative dividend of 6.5p net per annum, convertible into 10.3395 Carlton ordinaries for every 100 convertibles on March 31 1991, and on the same date each year through 2005; Carlton can require conversion after 75% have made the switch, and may also redeem the shares still outstanding between 2005 and 2010, and will anyway be redeemed on April 30 2010. Through a mix and match facility they can also allot to exchange their shares for all convertible or all ordinary Carlton shares; but as the number of each type of share to be issued is fixed there is no guarantee of getting the chosen option. The offer values UEI at approximately UKP513m. In essence the issue was settled yesterday morning when Hambros Bank, acting for Carlton, bought a further 12% of UEI shares bringing the number of irrevocable under takings to over 50% of UEI’s issued share capital. The acquisition will involve the issue of around 40m ordinary shares and 162m convertible shares, representing just over 28% of Carlton’s enlarged share capital, fully diluted. The merger comes at a point where both companies think they are of the right size to get together, before they become competitors. UEI, which has recently reported pre-tax profit up 24% to UKP31m on turnover up 15% to UKP163m for 1988 (CI No 1,175) is continuing to achieve steady organic growth, while Carlton accompanied the bid with spectacular end of year figures showing pre-tax profit up 98% to UKP42m on turnover up 117% to UKP235m – a result that was helped by the acquisition of Technicolor. The idea behind the offer is that UEI companies will continue to focus on researching and developing their innovative product ranges, and Carlton will provide the necessary marketing thrust to get them into new areas. The merged businesses will then reap the rewards. One example given is that Quantel can thrive on Abekas’ marketing skills, so that Paintbox can become a strong presence in the Japanese market. Such synergy is easy for Carlton to find in UEI’s Sound & Vision and Text & Graphics subsidiaries, but the other divisions sit a little incongruously within this media technology merger. In particular it seems unlikely that Carlton will retain the Cosworth car engineering company for very long. The official statement, however, was that no companies are for sale. Similarly, Carlton’s chairman Michael Green strongly refuted the idea that rationalisation would get under way incur ring job losses, saying that the media were labour intensive industries always on the lookout for new talent. As the integration of group activities gets under way, Peter Michael, currently chairman of UEI, will become joint chairman of the merged companies until the Annual General Meeting in 1990; thereafter he will become non-executive deputy chairman.
