TELEWEST COMMUNICATIONS accelerated the consolidation of the UK's television industry by preparing a pounds 2bn all-stock offer for Flextech.
The move, which comes less than a month after Carlton Communications and United News & Media said they plan to merge in a pounds 4bn stock swap, would let Telewest, the UK's second-largest cable-television company, create its own programmes and interactive services.
Telewest has relied on buying programmes from other suppliers and lagged behind rivals in creating interactive services such as shopping and banking. The new company would be 48.4 per cent-owned by Microsoft and AT&T's Liberty Media Group.
It will build upon popular Flextech channels such as UK Gold, which runs classic British programmes, Living, a women's lifestyle channel, and interactive services such as Screenshop.
"Strategically it makes a lot of sense for the companies to combine," said Aryeh Bourkoff, a CIBC World Markets analyst. "It emulates the strategy of Telewest's parents in the US cable industry, where companies have acquired content providers and been rewarded for it by the markets."
A formal agreement is planned next month, after a detailed review of both businesses. The companies said on 6 December that they were in merger talks.
Microsoft, the world's biggest software company and biggest shareholder in Telewest, would own 23.6 per cent of the new company, while Liberty, which already owns shares in both Telewest and Flextech, would own 24.8 per cent. Both companies support the offer.
By supplying programming and interactive services to other broadcasters, internet companies and even mobile phone companies, Telewest will be able to gain revenue from customers beyond the 4.6 million homes that are already covered by its cable network.
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