Vericool Finance

Earlier this year Sir Richard Branson pulled off quite a coup when he sold his mobile phone business to NTL for more than £900m, and took an 11% stake in the merged group. But it seems the deal was not enough for Branson, who is encouraging NTL to take an even bolder step – a cash bid for ITV.

Branson has long nurtured ambitions of TV stardom and such a deal would certainly change the face of British broadcasting by posing a significant challenge to BskyB, the Murdoch-controlled satellite group. But is it really a runner?

Takeover proposals come in all shapes and sizes. This one falls into the category of two drunks attempting to prop each other up. The rationale behind the merger – convergence – seems logical enough. On paper, ITV’s content and production capabilities would seem a near perfect match for NTL’s cable distribution network and broadband subscriber base.

But it’s questionable whether NTL is up to managing its own business, let alone pulling off a miracle at ITV. This, after all, is the company known to its customers as “NT hell”.

NTL is certainly stoking suspicion that it prefers to buy, rather than manage, its way out of trouble. It is a deal junkie, yet to bed down either its Telewest or Virgin Mobile mergers, and it is funding its deals on borrowings. Branson & Co would need to stump up £6bn to land ITV, taking loss-making NTL’s total debt up to £12bn.

Still, you can’t fault the killer timing. ITV is a rudderless ship, having swapped a lame duck chief executive for no chief at all. But shareholders may take the view that a management vacuum is preferable to being swallowed by a heavily indebted, poorly managed business, even if it is rebranded Virgin Media.

Perhaps the only merit of this triumph of the Branson ego over common sense is that it will flush out more credible bidders and deliver a sharp reminder to ITV to get its house in order. RTL, the owner of Channel 5, has been tipped as a possible suitor alongside several private equity groups.

This is a soap that is set to run and run, although if NTL can come up with the cash, there’s a strong possibility it will succeed. ITV shareholders are so desperate, they’d accept any cash exit at a credible price.

No wonder competitors are rubbing their hands with glee. Reasonably, they anticipate years of chaos and further decline.