Duplicity and bitterness in the big soap opera

NOTHING personal old man, it's simply business. Charles Allen, chairman of Granada, wanted Michael Green, his opposite number at merger partner Carlton, to fall on his sword. If he refused, Allen would wield the blade himself.

In a phone call at 6.30am last Tuesday, the Granada boss said he had decided to back major investors who were calling for Green to stand aside as chairman-designate of ITV in favour of an independent nonexecutive chairman.

Without the support of Granada, Green, who thanked Allen politely for contacting him, knew he had been denied the role he had yearned for all his working life.

The call meant the end of 55-year-old Green's dream and sent shock waves through corporate Britain. If shareholders could oust the elected chairman of a perfectly viable business, who was safe?

It also blew apart the carefully constructed facade that Green and Allen, 46, were the best of friends.

Only days before, after the Government gave the go-ahead for the £4.5bn merger of their companies, Green had joked that his children were learning to call Allen 'Uncle Charles'.

The pair had maintained they could work together, despite distinctly different personalities. Twice-married Green is a mercurial entrepreneur who made his first million by the time he was 21.

Allen, meanwhile, lives with his male architect partner in a gated mansion building in west London and is regarded as a highly effective 'bean-counter'. He rose through the corporate ranks and loves crunching numbers, though he has recently discovered a taste for media's 'luvviedom'.

Green had hoped until that early morning phone call that Allen would stick by him. After all, the two men knew and were shocked that their shareholders had been gunning for both of them.

On October 8, Anthony Bolton, manager of the £2.6bn Special Situations Fund of Fidelity International, one of the biggest investors in both companies, had met senior non-executive directors Sir Brian Pitman of Carlton and Sir George Russell of Granada.

The men thought that they would merely brief Bolton on how the proposed merger was progressing after the Government had given its approval for the two companies to combine the previous day.

Instead, Bolton, 53, stunned them by saying he was unhappy with their planned management structure. He wanted changes. Pitman and Russell had every reason to be shocked. After earlier grumblings in the summer, Fidelity had publicly denied it had any such doubts.

But even accounts of the 8 October meeting show different interpretations of Fidelity's views. Carlton felt Bolton wanted both Green and Allen out. Granada believed Bolton wanted 'management changes' at ITV, but did not specify Allen's departure. Fidelity said it did not demand Allen's head.

However, Russell, 67, former chairman of the Independent Television Commission, would have none of it. He said he and Pitman, senior businessmen with 90 years' experience between them, were quite clear about what they were told. 'Yes, Fidelity did ask for both men to go,' Russell insisted.

It was with this in mind that he and Pitman sent a letter to Fidelity the following day. They wrote: 'We do not share your view that Charles Allen and Michael Green should be removed from their positions.'

It was clearly an extraordinary misunderstanding between a major shareholder and senior nonexecutives. Bolton set out to canvass the views of other shareholders and on 14 October Pitman and Russell were handed a letter from Fidelity and seven other institutional shareholders representing 36% of Carlton and 33% of Granada. This demanded that only Green step down to be replaced by an independent, non-executive chairman. Allen no longer appeared to be a target. Three days later the investors said they wanted Green's scalp by noon last Tuesday.

So what happened between that first meeting on 8 October and the letter a week later? How did Allen escape the line of fire?

City sources now believe the Granada camp had already made it plain to investors that they would deliver Green's head in return for sparing Allen, whom they recognised was also under threat.

There had always been doubts about Green and Allen's role in the proposed merger. Not only were the two men temperamental opposites, but the last thing they ran together - ITV Digital - had ended up costing shareholders £1.4bn when it ignominiously collapsed last summer. The City was never going to forgive that.

Leading shareholders say that over the past nine months, they have repeatedly made known their doubts about the proposed management line-up. Both companies appear either not to have heard or to have misunderstood what they were being told. Russell says mutual concern that the merger should proceed 'muddied the waters' and led to confusion.

Either way, it seems clear Granada wanted Green out even before the story of the shareholder revolt became public, though Russell insists there was no deal between Granada and rebellious shareholders to save Allen at the expense of Green.

Russell said: 'The shareholders wanted a non-executive, independent, Higgs-type chairman [a reference to the report by banker Derek Higgs on best corporate practice]. It meant Michael Green clearly could not fit the bill. It was nothing to do with whether Green was competent.'

At an emergency meeting of the Carlton board last Sunday, Green was buoyed by the unanimous and public support of his directors, but he began to suspect the worst. Carlton's calls to Granada directors were not returned on Monday, Carlton sources said.

One senior City source said: 'Michael Green took it at face value that he was facing a shareholder revolt. But over the next two or three days the penny dropped that he was going to be stabbed in the back. Michael and the board had come to the conclusion that a very duplicitous game was being played and he was the victim.'

Granada's board meeting on Monday, chaired by Russell and with City law firm Lovells in attendance to remind everyone of their duty as trustees in such exceptional circumstances, saw the board decide that 'its interests will be best served by the appointment of a new chairman from outside the enlarged ITV plc'. As a sop, Green could stay on until the merger was completed early next year.

Friends of Green, who has refused to comment, say he is very bitter. They also say that the Carlton board considers itself the victim of a 'secret coup'.

One Green ally said: 'Carlton is very unhappy indeed. What was going to be a merger is now nothing other than a hostile takeover by Granada with nil premium attached. Originally, Granada was offering a 15% premium, then a year ago it became effectively a straight merger.

'Now, there will be no Carlton people in senior management roles at ITV, no one at board level with executive responsibility. What if someone comes along and offers a premium for Carlton?'

Forget Coronation Street, the merger of Carlton and Granada is the best soap opera in town, but what will happen in the next nailbiting episode? Will Green patch up his differences with Allen and lead his company down the aisle before bowing out gracefully?

No one who knows the combustible Green believes the credits are ready to roll just yet.