Falling share price at SMG sparks takeover speculation

Speculation was mounting today that Ulster TV could be preparing a £300m (€439.7m) move for the media group SMG, which owns Grampian and Scottish TV, Virgin Radio and the Pearl & Dean advertising business.

It is not the first time that Ulster has been linked to SMG, but recent troubles at its counterpart are likely to have re-ignited interest.

Shares at SMG have fallen by 23% in the past three months, while its chief executive Andrew Flanagan stepped down last week amid concerns about the company’s strategy after the acquisition of Virgin Radio three years ago.

SMG’s radio and television assets are likely to represent a good fit for UTV, which bought talkSport-owner The Wireless Group last year in a move that created a portfolio of 25 stations.

It could face competition for SMG from private-equity groups, while it would need to win the support of ITV, which owns 17% of SMG and may still have hopes of bringing the entire network under its control.

The Observer newspaper said UTV chief executive John McCann came close to making a bid two years ago but was deterred by the company’s share price.

A source in the City told the newspaper: “John McCann has crunched the numbers before and if SMG’s shares fall much lower, he could well have a go. He’s extremely ambitious.”

However, Mr McCann may need to raise additional capital as Ulster is thought to have about £100m (€146.6m) of borrowings following the Wireless purchase. It currently has a market value of £200m (€293.2m) and may also consider a merger, the Business newspaper said.

SMG lifted underlying profits 46% last year but it said in March that it faced a challenging time because of volatile advertising conditions.

The company’s TV business “marginally outperformed” ITV1 in 2005 but advertising revenues weakened as it lost viewing figures and because of a cut in spending by the Scottish Executive and retailers.

Mr Flanagan’s position has been taken on a temporary basis by Donald Emslie, who is the head of SMG’s television business.

Some shareholders are calling for Rob Woodward, a former Channel 4 commercial director, to take the helm with Richard Findlay, who is the ex boss of Scottish Radio Holdings, taking over from Chris Masters as chairman.