Merger Creates Billion Euro Radio Company

Michael Hedges October 1, 2004

A merger announced this week between UK radio giants GWR Group and Capital Radio will create a billion euro company.

The new company, yet unnamed, was valued at £711m – slightly over 1 billion euros - the day the merger was announced, Wednesday, September 29. Both companies issued trading advisories the same day and the stock value dropped just under 4%.

“This is a great moment in UK commercial radio's development,” said Commercial Radio Company’s Association (CRCA) chief executive Paul Brown.

“GWR and Capital have created a fine broadcasting company of enhanced national importance able to drive radio forward as a 21st Centrury medium and compete with the BBC more effectively to the good of commercial radio, its shareholders and its listeners.  It is good to see Ralph Bernard's and David Mansfield's relentless and persuasive support for ownership rule change both on behalf of their own companies and on behalf of the industry as a whole come to fruition and make this momentous move possible.”

If cleared by regulators – which is expected – the company will own and operate 55 local analogue stations, 93 digital channels, one national channel and interests in several digital multiplexes. The combined company takes 36% of the $600m UK radio advertising market.

Much early industry speculation surrounded the roles of GWR Group chairman Ralph Bernard and Capital Radio chief executive David Mansfield. Both are highly respected for their respective strengths. Bernard will become the new company’s executive chairman, overseeing strategy, managing the new board and the company’s digital assets. Mansfield will take on a more “operational” role as chief executive. Both broadcasters say agreement on their respective roles was decided early in the merger talks.

GWR finance director Wendy Pallet told UK industry press that £1.5m operational savings would come from staff reductions, about 100 jobs out of 1500 currently employed by both companies. Pallet will retain her position with the new company. 

The non-cash all-stock deal gives Capital Radio shareholders a one for one trade while GWR Group shareholders trade 100 shares for slightly better than 60 shares in the new company.

2003 mergers and acquisitions in the European media sector were valued at 16.8b euros, up slightly from 2002. Analysts see greater stability in ad markets contributing to increased merger and acquisition activity in Europe since the middle of 2003. UK observers expect other mergers within the radio sector, the most likely being EMAP and Scottish Radio Holdings.

Subject of more speculation, though highly questionable, is the interest of US media giants Viacom and Clear Channel in acquiring the cash-flow of the new Capital Radio/GWR Group. Clear Channel maintains a London office, largely to oversee its European outdoor platform companies. Former Viacom president Mel Karmazin announced interest in the UK radio market. However, since Karmazin’s departure Viacom chairman Sumner Redstone has not expressed serious interest. US media industry analysts say Wall Street would “punish” a company for ventures outside the US.