Capital Radio and GWR saw their share price rocket this morning after the radio groups confirmed they are in merger talks to create a single broadcaster worth more than £700 million.
This morning’s opening share price at GWR and Capital Radio climbed by 9.7% and 6.5% respecitvely as a result of the announcement that talks are underway for a ‘nil-premium’ tie up that would create the UK’s biggest radio group.
In a joint statement issued yesterday, the two broadcasters said: “The boards of Capital and GWR note recent press speculation and confirm they are currently in discussions concerning the possibility of a nil premium all share merger.”
The leading executives of both companies plan to continue in their jobs in a combined group. Capital Radio chief executive David Mansfield is expected to assume the same role at the enlarged company, while GWR chief executive Ralph Bernard will take on the position of chairman.
The two commercial radio heavyweights have a total of 55 stations between then, with GWR giving Capital a national analogue station in the form of Classic FM and Capital bringing its strong position in the lucrative London market to the merger table.
The combined group would also have a 40% share of the national radio advertising market, meaning that merger plans would almost certainly attract regulatory scrutiny from the Government’s competition watchdog. However, there are few other obstacles to the deal going ahead and GWR’s main shareholder, Daily Mail & General Trust, has already expressed its openness to the idea of radio consolidation.
Confirmation of the deal, which ends months of wide-spread speculation, is expected to prompt a wave of consolidation in the commercial radio industry, with the sector’s six main players keen to expand further to exploit the sector’s high economies of scale.
US or European media groups are also expected to take advantage of the new ownership regulations, which were relaxed under the Government’s recently passed Communications Act. Clear Channel, the world’s largest radio operator, is widely expected to bid for UK radio assets, as are a number of other global media conglomerates.
The expected raft of mergers and acquisitions in the commercial radio market has not come as quickly as expected and GWR was recently forced to sell its stake in Vibe Radio Services after having its acquisition of Chrysalis-owned Galaxy 101 blocked by the Competition Commission.
However, some of the industry’s smaller players have been making moves and SMG recently sold its 27.8% stake in Scottish Radio Holdings to Emap for £90.5 million. Kelvin MacKenzie’s Wireless Group also strengthen its position in the local radio market with the acquisition of Forever Broadcasting for £8.1 million.
It is understood that Capital and GWR will push on with merger talks this week, with the announcement of a formal deal expected in the next few days. Capital is being advised by Credit Suisse First Boston and GWR is being advised by UBS.
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