Ginger Acquisition Strengthens SMG’s Presence

This morning’s announcement that Scottish Media Group (SMG) has agreed a £225 million takeover of Chris Evans’ radio and television business, Ginger Media Group, will achieve one of SMG’s prime objectives: to expand the group’s national media presence and protect it from possible predators.

SMG already owns the Scottish Television ITV franchise, the Glasgow Herald newspaper, amongst other titles, outdoor advertising group Primesight (see Scottish Media Moves Into Outdoor With £35m Primesight Bid) and cinema sales house Pearl & Dean (see SMG Acquires Pearl & Dean For £22m). The deal with Ginger now offers SMG a national and London based radio station, Virgin, and a growing television production arm, Ginger Television. Ginger also has new media interests through its Ginger Online division.

The merger of the two businesses is still subject to approval from the Radio Authority (RA) which will consider the ownership implications of SMG’s control of Virgin Radio. The RA’s review of the deal is expected to be completed by April. The deal is also contingent on Scottish Media’s shareholders giving their approval; so far Flextech, the group’s largest shareholder with an 18.6% stake, has fully backed the proposed deal.

However, the move may represent something of a snubbing for Granada, another SMG shareholder with an 18.6% holding. Granada had hoped to consolidate its position in the ITV Network by eventually launching a takeover of Scottish Media; it had opposed the deal with Ginger, reportedly claiming that the price was too high. At the end of last year, when news of SMG’s interest in Ginger emerged, Granada chairman, Gerry Robinson, said that he would not be interested in buying a combined Scottish Media/Ginger Media company (see Granada Would Not Buy Scottish Media/Ginger Company, Says Chairman). In the meantime, Granada has written to the Office of Fair Trading (OFT) seeking permission to make a bid for one of its rival ITV groups, Carlton Communications or United News & Media (see Deadline Given For Granada Bid Approval).

Under the terms of the SMG/Ginger deal, Chris Evans is likely to net around £75 million. Evans and the Ginger management team will receive £40 million of SMG equity, to be paid in three equal, separate annual tranches in order to retain Evans in the business. Evans’ remaining money will be paid in cash. Ginger’s current chief executive, David Campbell, will retain day to day responsibility for the combined national media division. He will report to SMG chief executive, Andrew Flanagan.

Ginger’s Virgin Radio (AM and FM) currently takes a 2.7% share of listening according to the September 1999 RAJAR survey. However, Virgin’s total share has been steadily falling over the last three RAJAR surveys, from 3.3% in March and 2.9% in June. Across the two AM and FM stations combined, average weekly reach currently stands at around 3.9 million listeners; this has also fallen recently. In London, the FM station takes a 2.6% share of listening from just under one million listeners.

Radio has been the fastest-growing medium in the UK in terms of ad revenue for five of the last seven years, according to Zenith Media. Zenith also predicts that radio advertising growth will continue to outpace other media: a growth of 10% is expected for both this year and 2001. Radio’s share of UK advertising is forecast to rise from 4.4% last year to 5.5% by 2002, according to Zenith.

Commenting of the proposed acquisition of Ginger, Scottish Media chairman, Don Cruickshank, said: “This is a transforming acquisition for SMG at an excellent price. Ginger Media significantly strengthens our national presence and has outstanding growth prospects. With this deal, SMG becomes a leading player in UK media.”

Scottish Media Group: 0141 300 3000 Ginger Media Group: 020 7663 2000