Capital Buys Virgin Radio

(Updated since 9:54am)

Capital Radio announced this morning that it has bought Virgin Radio for £64.7 million in a merger which will create a powerful new force in the UK commercial radio market.

While relinquishing overall control of its station, the Virgin Group will take a 14% share of the new Capital Radio group and Richard Branson will become a non-executive director at the Capital Radio board.

As well as vastly increasing Capital’s control of London’s commercial radio listening, it is also expected that the merger will create a “pre-eminent UK radio group with the resources to commit to Digital Audio Broadcasting” when the guaranteed national licences become available next year. The Virgin Radio head office will now move into the Capital Radio group headquarters in Leicester Square.

Both Virgin and Capital are taking advantage of the 1996 Broadcasting Act which relaxed the rule prohibiting ownership of more than one FM and one AM station per area, to allow the ownership of three licences of which not more than two may be on the same waveband. As a matter of course the Radio Authority will be putting the new merger to a public interest test.

Capital does not see this as a problem, saying that the group intends to relaunch Virgin FM so that it becomes a separate entity to Virgin AM, and also that as there are currently 25 radio stations in London, Capital’s ownership of two FM licence would not have any effect on plurality, range of programmes or news information sources. The Capital Radio Group’s new points tally will also be well inside the current regulatory limit.

There will also be major shake-up in the way the newly expanded Capital group will sell its airtime. A source told Newsline that its sales house Media Sales & Marketing will cease to exist from September and the Capital stations will be sold from a new central point which will probably be called Capital Sales & Marketing. Radio stations currently served by MSM and not owned by Capital will be seeking new sales arrangements, though Paul Davies, MD of MSM, stressed that obligations to existing clients such as EMAP and GWR would be met. It is very likely that EMAP and GWR will be interested in setting up their own sales houses.

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