Flextech scales Scottish heights

Meg Carter reports
By acquiring a stake in STV, Flextech looks set to become a major force in UK television.

Flextech, the former oil services group turned TV programme provider, is on course to become a major force in British broadcasting following its acquisition last week of a 20 per cent stake in ITV company Scottish Television. Flextech already holds a 20 per cent stake in HTV.

The deal involves Flextech paying just less than 30m cash and transferring its stake in HTV - valued at 36m - to STV. The move has been supported by Mirror Group, which holds a 20 per cent interest in STV. As a result, Mirror Group will dilute its stake to 16 per cent and chief executive David Montgomery will join the STV board.

The deal commits Flextech to license more than 125 hours of STV drama and documentaries and commission new programming from STV - valued at 6m over three years.

Hallmark, the media and greetings card group which holds a stake in Flextech, is also in discussions with STV to co-fund the future development of children's programmes.

Things have certainly come a long way in the past five years. Flextech made its first media acquisition in 1990 - a 20 per cent stake in programme producer/distributor HIT Communications. Flextech had been floated as an energy investment company back in 1983, but it was not until the arrival of chief executive Roger Luard in 1986 that its focus began to change.

By 1992, Flextech was a media-only group, having built up stakes in local cable operators and the Children's Channel - now known as TCC. It attracted backing from Tele-Communications Inc (TCI) - the Denver-based US cable TV giant that now has a controlling interest in the company.

Today, Flextech's European programming interests are bundled into United Artists European Programming. UAEP manages a portfolio of channels in the UK, including Bravo, which it owns, TCC, the Discovery Channel,

TLC and The Parliamentary

Channel, in which TCI has stakes.

Flextech also has interests in UK Gold, UK Living, The Family Channel and European Business News.

The STV deal has been warmly received by City sources, who identify significant benefits for both parties. "An enlarged STV with links to TCI and HTV could form a new power centre within ITV," says one observer.

STV is likely to expand its international programming. It could even become a predator of other ITV companies to challenge Granada and Carlton's growing dominance.

The deal strengthens Flextech position by broadening its influence. "This is the next important step in the development of Flextech's terrestrial and broadcasting programming interests," says Luard. "We intend to use these new relationships (with STV and with Mirror Group) to further develop Flextech's programming."

With inevitable further rationalisations within the cable TV business as smaller operators struggle to become profitable and larger players jockey for position, TCI seems even more likely to be the overall winner in the end.

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