Renewed speculation amongst City traders that radio groups GWR and Capital are preparing to merge has seen the share price of both companies jump by 1.69% and 5% respectively as rumours continue to circulate that a deal is imminent.
Industry insiders have claimed that draft deals have been drawn up between GWR and Capital, but that their progress and completion has been continually hindered by last minute hitches leading to prolonged talks between the two broadcast heavyweights.
According to a report in the Independent, a nil-premium, all-shares merger is the most likely structure for a deal between the two firms, following the deregulation of radio ownership by the Communications Act earlier this year.
Merging the two broadcasters would create combined business worth approximately £700 million, which would have a mammoth 40% stranglehold over the UK’s radio advertising market. The deal would also include GWR’s wide reaching network of local radio stations and several City analysts believe a merger would be approved by the Government’s competition watchdogs.
Reports suggest that the main hurdle now preventing a merger is the division of power between Capital’s chief executive David Mansfield and GWR’s chairman Ralph Bernard. The newspaper claims that both broadcast bosses are eager to run a combined radio group, sparking a power struggle with the potential to derail proceedings before completion.
Earlier this year Mansfield moved to quash speculation surrounding the potential deal with Capital, denying rumours that the group had held formal talks with its rival and dismissing reports by the Sunday Express to the contrary as factually incorrect (see GWR Denies £840 Million Merger Talks With Capital).
GWR has previously attempted to bolster its position in the UK’s radio market, but suffered a blow to its expansion plans last year, when the Competition Commission blocked the company’s acquisition of Chrysalis Radio’s Galaxy 101. GWR had hoped to purchase the music station and merge it with Vibe FM.
The two firm’s share price has remained reasonably steady over the past three months, despite the continuing debate over their future on the City’s trading floors. Capital has averaged a value of 425p in the three months since July, while GWR has managed a lesser average of 250p in the same period.
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