Blood’s in the Water! PE’s Circle UK Media!

Michael Hedges May 18, 2007

Ratings are bad. Ad revenue limps. EMAP CEO Tom Moloney “suddenly” resigns. Chrysalis posts a loss.

Multi-media EMAP is intent on moving away from low-growth publishing and broadcasting, lured by the high-value conference/exhibition business and the web. To raise the necessary financing it is dumping radio stations. In the midst of its well-known strategy, private equity companies (PE’s) are circling. The company is ripe for take-over and break-up.

Tom Moloney’s departure was called “abrupt” and “sudden.” Company strategy wasn’t called into question. It was the speed of execution. The board is looking for a more “entrepreneurial” leader (read: impatient).

EMAP owns London radio station Magic 105.4, the Kiss radio franchise, the Cannes-Lions advertising festival, B-to-B publications and slick gossip magazines Heat, FHM, Zoo and Grazia.

Moloney is “not the most popular CEO around, “ said UK stockbroker Oriel Securities analyst Redwan Ahmed, quoted by Bloomberg. “He hasn't really delivered on growth. There's a view in the market that either there will be a bid, or the company will break itself up.”

After launching the US edition of FHM in 2000, Moloney returned to the UK as company COO, then CEO in 2003.  EMAP ditched its French titles last August and the US edition of FHM in December.

EMAP shares rose on the announcement of Moloney’s departure. Stock traders are excited about stock trading.

Chrysalis, too, is dumping radio stations. Its music publishing business is healthy, reporting €730,000 (£500,000) profit for the first half of the fiscal year and recently signing hit act The Gossip. The company reported 9.1% loss in advertising revenue for the period, though ad spending across all media dropped.

Chrysalis, the UKs third largest radio broadcaster, owns London station Heart. The company is said to be looking for €290 million (£200 million) for the radio stations. It’s Irish radio stations Today FM, FM104 and Highland Radio are officially on the block. Buyers – at the price suggested – haven’t exactly rushed the door. UTV said it’s no longer interested. Denis O’Brien, principal owner of successful Communicorp, is said to be more interested in opportunities on the Continent. 

Last weeks RAJAR radio audience results for the first quarter did little to warm the investor set to radio broadcasting, although digital channels continue to attract attention. The BBC’s lead over commercial radio expanded even further, now a record 13% difference. Both EMAP and Chrysalis owned stations suffered. GCap, last years favorite radio dog to whip, saw improvement among its primary outlets, adding credibility to company strategy and, even, the notion of having a strategy. 

PE’s interest in UK media is stronger than ever, fueled by investor money looking for quick profits in break-ups. When a CEO departs “abruptly,” as with ITV and SMG last year, the sound heard from the PE’s is the theme from “Jaws.” Highly leveraged media companies have little or no defense.

Patience has never been a media virtue although it often takes on the appearance of flailing about in water too deep, action that always attracts sharks. Two years ago, Viacom Chairman Sumner Redstone broke the company he controls into two parts. The high-energy new media business (Viacom) was separated from the dottie old media (CBS). Unable to seize the media flavor of the month, Viacom soured while CBS radio and local TV moved forward.

Private equity companies, even more impatient, provide the valuable service of taking hesitation away from company directors and managers. Unfazed by whether or not Bob in bookkeeping (or the CEO) gets his pension, PEs cut, squeeze and sever until a business can be sold to an operator sufficiently excited about shareholder value. If in the process the fabric is shredded, too bad. There’s always another deal.