April 27, 2011 / 6:35 AM / 8 years ago

UPDATE 2-ITV settles legal dispute with Scottish partner

* STV to pay 18 mln stg to end dispute

* STV says in shareholder interest to end standoff

* STV shares up 10.6 pct, ITV down 2 pct (Adds reaction, share prices)

LONDON, April 27 (Reuters) - ITV (ITV.L), Britain’s biggest free-to-air commercial broadcaster, has settled a long-running legal dispute with its Scottish network partner, lifting a huge cloud from STV’s (STVG.L) outlook.

STV will pay ITV 18 million pounds ($29.63 million), less than analysts were expecting. The settlement also boosts the chances of STV resuming a dividend, sending its share price up 10.6 percent on Wednesday.

Relations between the two broadcasters soured in 2009 after STV opted out of some ITV programmes to show homemade shows instead.

ITV said then it would start legal proceedings to recover what it described as a 38 million pound ($62.56 million) shortfall in network programme contributions. STV said at the time the claim was completely without merit and launched its own legal challenge.

On Wednesday the two sides said they had agreed to settle the dispute.

The 18 million pounds consists of a 7.2 million pound cash payment payable this year and 10.8 million pounds either in programme rights at the end of the year or cash, as adjusted, depending on further discussions with ITV.

STV will also receive 2.4 million pounds of credit for programme opt outs in 2011, giving a net cash impact of the settlement of just under 5 million pounds which was much better than many analysts had expected.

In total, STV said it expected to book an exceptional charge as a result of the settlement of approximately 9 million pounds in the 2011 first half results, in addition to current provisions.

“I am pleased that we have reached a wide ranging settlement with ITV and that our two organisations can work collaboratively in future for the benefit of the Channel 3 Network,” STV Chief Executive Rob Woodward said.

STV had said it would not pay a dividend while the issue was unresolved.

Numis analysts said the better than expected cash impact resulted in a 15 million pound uplift in its valuation, taking the target price to 171 pence from 131 pence.

“We believe that resolution of the long-running dispute is in the best interests of both parties and in our view the settlement is attractive for both ITV and STV,” they said.

Shares in ITV were down 1.5 percent in early morning trading.

Reporting by Kate Holton; Editing by Paul Sandle and Erica Billingham

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