ITV has increased its stake in breakfast producer GMTV by agreeing to buy out SMG for £31m.

The deal gives ITV an extra 25% share of the business - adding to the 50% it already held due to Carlton and Granada's merger.

SMG will use the proceeds of the sale to reduce debt.

Andrew Flanagan, Chief Executive of SMG, said: "The ITV merger created a 50% shareholder in GMTV and we don't want to have a minority interest in someone else's media business. It is clearly in our shareholders' interests to sell the stake at an attractive price. Our focus is on driving and capitalising on the operational performance of our wholly-owned media assets as the advertising markets continue to improve."

Regulatory approval and SMG shareholders' approval need to take place before the plan can go ahead.

Completion of the acquistition would oblige ITV to make an offer at the same price to Disney for its 25% shareholding in GMTV.

ITV also announced today that it had reached an agreement on a range of other commercial issues with SMG including:

  • Use of ITV brand name
  • Extended permission for ITV to use some of SMG's digital terrestrial spectrum in Scotland to transmit its own services. ITV currently uses this spectrum to broadcast wholly-owned digital channels ITV2 and the ITV News Channel
  • Programming arrangements for ITV branded channels
  • Cross promotion of ITV2 and the ITV News Channel on Scottish TV and Grampian TV franchises
  • The sale of SMG's national television airtime on its Scottish TV and Grampian TV Channel 3 licences through ITV's sales house
  • Outsourcing of certain administration functions of the ITV Network Centre to ITV

Charles Allen, CEO of ITV, said: "This is another step in delivering our strategy to develop further the single ITV business. We have reached agreement with SMG on a number of points confirming the operation of the ITV Network.???

On the subject of GMTV he commented "GMTV is an excellent business and in 2003 grew its share of viewing from 1.58% to 1.61%. ITV plc's acquisition of an increased stake in GMTV at a reasonable price will simplify the ownership structure and enable more agile decision making which will benefit both ITV and GMTV as we work even more closely together."