SMG and UTV in £400m merger talks
The owners of Virgin Radio and talkSport were today in talks over a merger thought to be worth around £400m (€588m).
Virgin owner SMG said it has received a merger proposal from Ulster TV after months of speculation that UTV was interested in making a takeover bid.
SMG, which also owns Grampian and Scottish TV and the Pearl & Dean advertising business, said: “SMG confirms that it has received a merger proposal from UTV. Under the terms of this proposal, SMG shareholders would receive a 50% interest in the merged entity.”
It is thought that the Northern Irish firm approached the Scottish group over the £400m (€588m) merger. UTV has a market capitalisation of £175m (€257.2m) while SMG’s is £221m (€325m).
Shares at SMG have fallen by more than 20% in the past three months but were up 3% today.
Chief executive Andrew Flanagan stepped down last month amid concerns about the company’s strategy after the acquisition of Virgin Radio three years ago.
SMG’s radio and television assets are likely to represent a good fit for UTV, which bought talkSport owner The Wireless Group last year in a move that created a portfolio of 25 stations.
It is understood UTV chief executive John McCann came close to making a bid for SMG two years ago but was deterred by the company’s share price.
However, Mr McCann may need to raise additional capital as UTV is thought to have about £100 million of borrowings following the Wireless purchase.
A merger would need the support of ITV, which owns 17% of SMG and may still have hopes of bringing the entire network under its control.
SMG lifted underlying profits 46% last year but it said in March that it faced a challenging time because of volatile advertising conditions.
The company’s TV business “marginally outperformed” ITV1 in 2005 but advertising revenues weakened as it lost viewing figures and because of a cut in spending by the Scottish Executive and retailers.
Mr Flanagan’s position has been taken on a temporary basis by Donald Emslie, who is the head of SMG’s television business.
Some shareholders are calling for Rob Woodward, the former Channel 4 commercial director, to take the helm with Richard Findlay, who is the ex-boss of Scottish Radio Holdings, taking over from Chris Masters as chairman.
