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SRH Takeover

By The Drum | Administrator

June 30, 2005 | 6 min read

Its courtship was traditional but swift, taking just 18 months from first approach to marriage. All in all, the only surprise of Emap’s eventual acquisition of Scottish Radio Holdings last week was the tenacity of its shareholders. Its final value at £391m surprised few after SRH shareholders bullishly rejected an earlier offer of 1,040p per share, holding out for an extra 48p a share. That assertiveness paid off. It finally sold for 1,088p. Since SRH did its first share options in 1994, it has generated individual shareholder revenue return of £519, £130 more than its rivals.

Emap first acknowledged an interest in acquiring SRH in January last year, when it bought 27 per cent of the group for £90.5m. After the creation of GCap Media in September – following the merger of Capital and GWR – the City’s eyes were on Emap chief executive, Tom Moloney to make his next move, which he did at the beginning of June.

Now, speculation is mounting that SMG’s standalone station, Virgin Radio, is left vulnerable and is being circled by investment house 3i and Lord Alli, while rivals Guardian Media Group and Chrysalis are both understood to be interested in acquiring the station.

Although SRH’s regional strength has served it well in building a great stock of brands, it also made it an obvious target for Emap.

Stuart Feather, joint managing director at Feather Brooksbank, believes that Emap would be unwise to lose that local knowledge base. “SRH has got a very strong local sales team, and from what I know, they’re going to keep them, which is a good thing,” he says. Euan Jarvie, managing director of Mediacom, also believes that the benefits for SRH are huge. “I think it’s great for SRH and its listeners, which in turn is good for advertisers,” he says. “The industry is dependent on what comes out of stations for it to grow. It’s a shame from a sentimental point of view, but if you look at how these businesses are run, immediately SRH has got a sales house in London. Once you get beyond sentimentality, it’s progressive.”

Feather also believes the deal is great for the media industry in Scotland. “It is fantastic,” he says. “SRH hasn’t been moving its products forward and the strength that was in Radio Clyde and Radio Forth is no longer there. In being ultra defensive when other stations launched, they were chasing the audience that they thought the new stations were aimed at. The stations that are growing are the ones with a strong identity.”

Emap’s history of building strong brands is well documented. As owner of Kiss and Kerrang!, it’s proved that niche tastes are a strength. There has been speculation that it will roll out the Magic brand across Scotland, something that it would be forced to invest in. “I would expect Emap to change some of the products in some of the places,” says Jarvie. “Emap’s spent a lot of money on its brands over the years. If it wants to bring in other brands, they’d have to invest in rebranding or bid for other licences. Are they going to throw money at it?”

That could be doubtful. Although Emap’s already said that the future of its Scottish office is safe, a cost-cutting exercise is inevitable, with its stated intention being savings of £5million over three years. “If your market is tough, you have immediate economies of scale if you buy something else,” says Jarvie. “Market share is difficult to grow organically, if you look at the consolidation in TV, print and all the other sectors, acquiring other companies is a good way of streamlining your operation. This is nothing to do with the advertising market, it’s to do with shareholders. It’s a pretty clear message that everyone has their price. I think they [Emap] will look at their business and make some changes.”

Feather agrees. “As we move towards a more digital age, you have to have something that you can say ‘we do better’,” he says. “Emap is renowned for innovation.”

Jarvie believes a lot of people are focusing too much on the loss of a Scottish-owned company instead of seeing the bigger picture. “I think it’s always a shame when a Scottish-owned business stops existing,” he says. “It was valued at £15 a share at one point, so there’s no denying it was a very successful business. We do tend to focus on what a calamitous event it is when a Scottish company becomes owned by a company down South. You can get emotional about it, but at the end of the day it doesn’t matter. You have to have a successful station to pay people. Radio’s a strong place in Scotland, you just need people with deeper pockets.”

ïïïïwho owns what?ïïïï

EMAP:

Kiss 100 London

Kerrang 105.2 Birmingham

Big City Network:Radio City 96.7 FM

Metro Radio

96.3 Radio Aire

Viking 96.9FM

Key 103 FM

Hallam 97.4FM + 102.9FM + 103.4FM

Rock 97.4FM

TFM 96.6FM

Magic Network:London, Manchester, Sheffield, Preston,

Stockton on Tees, Liverpool, Newcastle,

Leeds and Hull

Emap also operates 13 multiplexes across the UK.

Scottish radio holdings:

Radio Clyde

Radio Forth

Radio Tay

Today FM

Vibe FM

Wave FM

West Sound Radio

CFM Radio

Downtown Radio Cool FM

FM 104

Moray Firth Radio

Northsound Radio

Radio Borders

It also owns 3C Digital and Score Digital, which holds the DAB licences for Northern Ireland, Ayr, Glasgow, Edinburgh, Dundee/Perth and Inverness.

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