ITV's future on thinner ice as drama rumbles on

SHARES in ITV rose last night as analysts warned that the broadcaster's leadership strategy lay in tatters, fuelling speculation that a takeover bid from an industry buyer such as Channel Five owner RTL could materialise.

Britain's biggest free-to-air commercial broadcaster was dealt a fresh blow when the favourite to take over as non- executive chairman, Sir Michael Bishop, ruled himself out of the job yesterday.

The news was followed with an announcement that chief operating officer John Cresswell had been appointed interim chief executive but planned to leave the company once the post has been filled with a permanent appointment.

The group, facing the worst advertising downturn for decades, has been searching for a new chief executive and chairman since Michael Grade announced he would step back from the day-to-day running of the company. It has yet to appoint either of the people who will succeed Grade in the roles of non-executive chairman and chief executive.

In a statement ITV said: "The (nominations] committee has revised its shortlist accordingly and is continuing its search with all due speed."

However, the shares closed up 2 per cent at 47.33p as analysts speculated that the company could once again be an acquisition target if financial markets continued their recovery.

In a note, Cazenove warned that the turmoil surrounding the management of the broadcaster made it appear a "vulnerable target".

The broker said: "Overall we believe the management uncertainty news is likely to increase potential bid speculation as the group is now likely to be seen as a very vulnerable target, in our view."

Shares were also lifted by a note from Goldman Sachs that upgraded the stock to "neutral" from "sell". The bank said TV advertising data in the past two quarters was modestly ahead of forecasts and ITV was attractively valued against its European peers. But the potential for possible buyers emerging to exploit the lack of leadership is tempered by balance sheet issues such as ITV's £728 million debt and £580m pension deficit.

Those tipped for the chairman's role now include Sir Christopher Bland, a former chairman of the BBC's board of governors; Niall FitzGerald, the former chairman of Reuters; and Sir Christopher Gent, who ran Vodafone from 1997 to 2003 and is now chairman of pharmaceuticals giant GlaxoSmithKline. Martin Broughton, former president of the CBI, has also been linked to the post.

Meanwhile, WH Smith chief executive Kate Swann and Peter Fincham, ITV's director of television, have been linked to the chief executive role.

Whoever takes up the post faces a tough task, as ITV has long been battling with falling advertising, high debts and a pension deficit. Many believe it will need a rights issue to bring its finances back onto an even keel. Analyst Patrick Yau at Canaccord Adams said Bishop ruling himself out of the running was significant.

He said: "With so many potential candidates stepping back from the job or refusing the job, we wonder what the big issue is at the heart of ITV."

Meanwhile, Channel 4 has begun its search for a chief executive to replace Andy Duncan, with the appointment of headhunter Egon Zehnder. The search for a new chief executive, which started last week, is running alongside the search for a chairman to replace Luke Johnson.

Communications regulator Ofcom, which is overseeing the search for a chairman, is hoping to complete it by the end of this month. The high-profile names linked with the job include Camelot chief executive Dianne Thompson.