The Granada and Compass Groups have confirmed that they are in negotiations that could lead to a merger. Compass, the UK's largest non-retail catering firm, has a current market value of around £6bn, and would clearly be the lesser partner in any merger, compared with Granada which is worth some £12bn.

If the deal comes to fruition, Granada aims to split the merged company into two separate businesses within a year: a hospitality group, which would include Compass, and an independent media group. The latter would be hived-off as a separate independent company.

Granada chairman Gerry Robinson would stay on until the media group demerger, following which he will retire as chairman. On demerger, the hospitality company will be chaired by Francis Mackay and the media company by Charles Allen.

News source: BBC Online Business News (UK)