GWR and Capital in merger talks

BRITISH commercial radio giants GWR and Capital Radio were yesterday reported to be in advanced merger talks.

The two groups are understood to be considering a merger of equals which would see stations such as Capital FM and Classic FM brought into the same company.

The pair are expected to make a stock market announcement today confirming that they are in talks after shares in both companies rose in recent days on the back of speculation.

GWR’s shares closed at 262.5p on Friday, 10.5p higher than the previous week, while shares in Capital were 29p up over the week at 430p.

If the merger was to go ahead the new group would have a market capitalisation of around £710 million, according to the Sunday Times.

The paper also reported that Capital chief executive David Mansfield would continue in that post at the enlarged company, while Ralph Bernard of GWR would be chairman.

A GWR spokesman declined to comment on the speculation and no one from Capital Radio was available to comment.

But the Sunday Times reported that the Daily Mail and General Trust, which has a 29.9% holding in GWR, was open-minded about the merger. Other institutional shareholders are also understood to support the deal.

Capital, which claims to broadcast to more than half the UK population, has made no secret of its ambition to expand through acquisitions.

The group’s radio stations include Capital FM, Century FM, Capital Gold and Xfm, as well as regional stations such as Red Dragon in South Wales and BRMB in the Midlands.

GWR boasts more licences and a larger audience share than any other UK commercial radio group, with stations including Classic FM and 33 local offerings such as Essex FM, Leicester Sound and Trent FM. Consolidation within the industry has been widely expected following the introduction of the Communications Act, changing the rules governing the merger of radio companies.

In May, Capital reported flat half-year profits of £12.1 million, while revenues for the six months to March 31 rose by 4% to £59 million.

In the same month Bristol-based GWR said pre-tax profits before one-off items and goodwill for the year to March 31 had soared by 99.5% to £17.1 million, as structural changes and business improvements made during the advertising downturn paid off as the market recovered.