Capital And GWR Agree £711 Million Merger Terms
Capital and GWR have this morning agreed the terms of their proposed £711 million merger to create a single broadcaster controlling more than 40% of the radio advertising market.
It will also bring Capital FM, Classic FM and Xfm together under a single company with a combined turnover of around £243 million. The merged group will have a 30% share of the commercial radio audience and a dominant position in the market for radio airtime sales.
Daily Mail & General Trust and the directors of GWR will hold approximately 35.1% of the new company. Capital Radio shareholders will control a majority 52% stake and GWR will assume control of the remaining 48% in an all-share, no-cash deal.
It is expected that the merger will provide shareholders with pre-tax cost savings in excess of £7.5 million, achievable following the completion of what looks set to become on of the biggest deals in radio history.
As expected, Capital Radio chief executive David Mansfield will assume the same role at the enlarged company, while GWR chief executive Ralph Bernard will take on the position of chairman. A representative from Daily Mail & General Trust, which owns a 30% stake in GWR, will also assume the role of non-executive director.
Commenting on the deal, Mansfield said: “Today’s announcement creates a vibrant new radio business with a leading position in an attractive and growing sector. Capital and GWR share common strategies and values, and have complementary brands and geographic transmission areas in both the analogue and digital spectrum.”
Bernard added: “This merger is a fantastic opportunity to create UK commercial radio’s champion of the digital age. The enlarged group will be in a strong position to drive the growth of commercial radio’s share of listening and total advertising by providing enhanced services to listeners and greater opportunities for advertisers.”
Both Capital and GWR claim the deal, which still requires regulatory approval, will create would a leading commercial radio group that is well-positioned to benefit from the strong potential growth of the commercial radio sector. They believe the group will play a pivotal role in the development of digital radio, whilst helping to accelerating the future growth of commercial radio’s share of listening in relation to the BBC.
The £711 million merger will also see the creation of a single Capital/GWR sales house, which the broadcasters believe will provide advertisers with better access to the “most attractive demographics” in the UK, whilst improving customer service.
However, both ISBA and the IPA have already expressed their concern that the merged entity could use its dominant position to push up prices for advertisers. It could also prompt rival broadcasters to merge in a move that could distort competition in the market for airtime sales.
It is widely expected that the deal, which has been on the cards since the Government relaxed the media ownership regulations at the start of this year, will kick start the long-awaited consolidation of the commercial radio industry. Emap has already expressed an interest in increasing its 27% stake in Scottish Radio Holdings and a number of smaller operations have been moving to consolidate their interests (see Rumours Surround Emap Take Over Of SRH).