Ministers’ rationale for privatising Channel 4 looks extremely flimsy

What’s the subplot with the government’s latest flirtation with the idea of privatising Channel 4? There was a clue, possibly, in the view expressed this week by Tory MP Andrew Griffith, who has clout in these matters since he was a long-serving finance director of Sky.

In a column in the Telegraph, Griffith complained about how parochial UK competition regulators have stymied growth in the sector, missed the rise of on-demand streaming and failed to understand that UK-based TV players need scale to compete with the Americans. Specifically on Channel 4, he said: “Its next, and most enduring, contribution to the UK media landscape may be to keep some of its distinctive remit but as part of adding useful scale to another UK-based operator.”

Which UK-based operator does he have in mind? Presumably not Sky since his old employer is now owned by Comcast of the US. Definitely not the BBC, obviously. That, more or less, leaves ITV.

The idea of an ITV-Channel 4 merger has been touted many times in the past, and competition has usually been seen as the main obstacle. If promoting UK global success in TV were now to be deemed more important than sustaining domestic rivalry, then, yes, the game might be on. But there are at least two further problems.

First, would ITV want to own Channel 4? The answer would surely depend partly on what ITV would be expected to pay. At £1bn, a price-tag that has been mentioned in the past, ITV’s shareholders would probably throw a fit. Channel 4, remember, doesn’t own most of its intellectual property and doesn’t have a production house since its remit is to work with independent producers.

That last point applies to the second problem, the one usually advanced by management. What would one lose by housing Channel 4 within a bigger owner? Alex Mahon, chief executive, mentioned regional hubs in Leeds, Glasgow, and Bristol, which could be jeopardised, but the wider argument is about Channel 4’s role within the UK television “ecosystem”.

It’s a fluffy jargon word that Channel 4 executives could do themselves a favour by dropping. They would make their point more effectively to commercially minded ministers by comparing themselves to an early-stage venture capital fund that takes risks that others cannot. Viewed that way, there’s a strong argument that Channel 4 is more than pulling its weight in the national interest. The danger in loss of independence is irrelevance and dullness.

Yes, Channel 4 is an oddity in being a state-owned but commercially funded operation. But there is no current financial crisis and no immediate problem to solve. One senses the government is determined to privatise – but the logic looks flimsy.

See, it is possible to say no to a private equity bidder – and then keep saying no. The board of Senior, the aerospace engineer that supplies parts to Airbus and Boeing, on Tuesday rejected a fifth offer from US suitor Lone Star.

The display of resistance from the boardroom is impressive, especially as Senior’s share price was a smidgeon over 100p at the start of the saga and the bidding moved in stages from 150p to 200p. Since Lone Star’s latest approach was billed as “final”, one assumes the final rejection is the end of the saga. Private equity rarely does hostile bids.

Parallels with Morrisons’ position are imprecise, obviously. The aerospace industry was clobbered by the pandemic and is now in recovery mode, so Lone Star was obviously being opportunistic in its timing. That’s harder to say about Clayton, Dubilier & Rice’s approach: supermarkets’ share prices were stodgy even before Covid.

But, assuming CD&R returns with a better offer than its first miserable effort, Andrew Higginson, Morrisons’ chairman, should still take note. A board is meant to form a long-term view of real value and then, if necessary, defend it. Given that Morrisons has been in business for 120 years, the long-term really is meant to be a while.

As bitcoin briefly fell below $30,000 on Tuesday, versus a peak of $65,000 in April, one could hear a chorus of would-be crypto experts warbling about “support levels”.

Come on, in the grand sweep of financial markets, cryptocurrencies have been around for about five minutes, so citing previous examples of when prices have stopped falling is pointless. Bitcoin is speculation on stilts. Anything could happen.

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