Canadian broadcaster Canwest, which owns a 45% stake in TV3, indicated last week that it was seeking an exit from the station. A number of media reports subsequently stated that Canwest was merely selling its 45% stake, but this is not the case. Canwest intends "to structure a 100% sale of the business, " several sources familiar with the sale process told The Sunday Tribune.

TV3, which could be worth about 200m, is effectively a joint venture between Canwest and ITV at the moment, with each owning 45% of the business. The remaining 10% is held by a group of Irish shareholders, including some of the original founders of the station, but these C shares are understood to carry lesser voting rights than those held by the two media groups.

Under a series of parameters laid down in the shareholders' agreement, drafted when Granada (now ITV) became a shareholder in TV3 almost six years ago, last week's Canwest move has triggered a full sale of the television business.

It is thought that ITV has the first option to buy the Canwest stake and, if its management chooses to exercise that right, it will automatically also acquire the other 10% as part of the process.

If ITV fails to take up its option, then the British company must sell its stake in the Irish channel and the other 10% of the equity would also come onto the table.

It is not clear at which point in the sale process ITV's option crystallises, but it is known that the Irish shareholders, who include Windmill Lane founder James Morris, U2 manager Paul McGuinness and former accountant Ossie Kilkenny . . .do not have any pre-emption rights.

While ITV is seen as favourite to buy TV3, it is by no means a foregone conclusion, according to sources.

Such a deal could make sense for ITV, since TV3 currently takes much of its output from the British channel. But, although they sit on the TV3 board as joint venture partners, there has clearly been a significant split between Canwest and ITV in recent months.

In November, it emerged that TV3 was suing its own shareholder ITV over the British company's decision to begin broadcasting on satellite into the Republic. TV3 went to court, in a case that is still active, because it claims that it has exclusive rights in the Republic of Ireland to certain ITV programmes.

Some sources argue that the relationship between Canwest and ITV has soured to such an extent that the Canadian group may have started the sale process in order to force the hand of the British company, but others dispute this.

Canwest has hired British merchant bank Hawkpoint to handle the sale of the business and an initial 10-page teaser document has already been dispatched to a number of parties.

It is understood that the process has attracted the interest of both trade and financial buyers.

TV3 had operating profits of 15.3m on a turnover of 48m in the 12 months to the end of August 2005, its most recent financial year. Canwest's recent first quarter results, for the three months to the end of last November showed a 20% jump in operating profits for the Irish business.

Potential bidders must sign a non-disclosure agreement before receiving the full information memorandum, which is expected to be issued within the next couple of weeks.

Ulster Television is certain to be interested in acquiring TV3, given that the expansionist Belfast company has lost much of TV market in the Republic because of ITV programming being carried on TV3.

Setanta, which is backed by Benchmark Capital and recently ran the rule over Ntl, is also likely to take a look a the business. Radio station owner Denis O'Brien may enter the fray, while the newly merged Corus/Ntl might also be interested.

Another possible bidder is Sky, which reportedly looked at Channel 5 in the UK and knows the Irish market intimately. Channel Five owner Luxembourg-based RTL is also considered a possible bidder, as are Swedish broadcaster SBS and the Italian group Mediaset, owned by Italy's prime minister Silvio Berlusconi.

Although the ITV relationship complicates the sale process, European terrestrial television firms rarely come on the market and there may also be interest from a number of private equity groups.

According to the initial documentation, two separate businesses are on the block.

Canwest is selling TV3's sales house, which is 100% owned by the Canadian group. It also plans to structure a transaction involving 100% of Canwest Granada Media Holdings, which is the broadcast company owned by Canwest, ITV and the Irish shareholders.

Prospective bidders are likely to want further clarification of the exact nature of ITV's option over the TV3 business as well as a detailed explanation of the agreement under which ITV supplies programming to TV3.

If ITV decides not to buy TV3, this programming deal will be central to valuing the Irish broadcaster. Much of TV3's key content comes from ITV, as it provides popular programmes such as Coronation Street, Emmerdale Farm, Parkinson and I'm a Celebrity Get Me Out Here.

The impact that ITV's content has had on TV3 has been dramatic. In January 2000, shortly before Granada bought its stake in the business, TV3 had an 8% share of adults aged between 15 and 44, and was the joint third most popular channel in the Republic, alongside UTV and BBC1 but behind RTE1 and Network 2.

Now, with ITV providing a host of programming, TV3 is the Republic's second most popular channel . . . attracting 13.5% of adults and 13.8% of viewers between 15 and 34.

The financial basis upon which TV3 receives ITV output has never been disclosed, and other potential bidders for the station will want this clarified.

They will also need to know when the current agreement expires, and will probably seek an indication as to whether or not ITV would renew the deal if it was not a shareholder.

Some television industry insiders suggest that the changing nature of ITV means that this deal is becoming less valuable, which could be a reason why Canwest has decided to sell now.

When ITV plc was created from the merger of Granada and Carlton, the initial plan was that the company would produce as much of its own output as possible, since this would keep the maximum amount of money within the group. But poor audience figures have forced company executives into a rethink and ITV is now planning to buy in more content from outside producers.

All of ITV's in-house productions are covered under the TV3 deal, but it is thought that the Irish company has to cut separate agreements with independent producers who sell to ITV . . . and that this increases the cost to TV3.

TV3's new owner should be in place by the summer, just in time to schedule a slew of movies to compete with RTE's wall-to-wall coverage of the FIFA World Cup Finals in Germany . . . despite Ireland not having qualified.