When he was still the chief executive of ITV, Charles Allen insisted he would never retire. So it was perhaps no great surprise that, less than a year after being ousted from the troubled broadcaster, he returned last summer at the helm of a new investment company bent on consolidation in the radio industry. Now, as chairman of Global Radio, Mr Allen is poised for a comeback after the private equity group tabled a hard-to-refuse offer for the beleaguered GCapMedia yesterday.
Mr Allen's first move at the helm of Global Radio, which is backed by, among others, the wealthy Irishmen JP McManus, John Magnier and Dermot Desmond, was to buy Chrysalis Radio, the owner of stations including Heart, Galaxy and LBC, for £170m last June.
Then, in January, the temperature rose when Global made a £313m bid for GCap, owner of Classic FM and Capital 95.8, which has seen its audience, share and profits fall since it was formed from the merger of Capital Radio and GWR three years ago. The offer was squarely refused by GCap, whose new chief executive, Fru Hazlitt, branded the 190p-a-share bid "derisory".
Ms Hazlitt responded last month by announcing the closure of two digital stations – Planet Rock and The Jazz – and by selling GCap's stake in the national DAB radio platform Digital One, as well as selling off its three unprofitable Xfm stations in Scotland, Manchester and Wales in an attempt to save £8.8m and boost profits.
Global Radio was given a five-week deadline by the Takeover Panel to make a formal offer for GCap, or "put up and shut up" and refrain from bidding for at least six months. That deadline comes to an end today and, in the past week, Global has twice increased its bid for the radio company.
On Friday, it tabled a £333m bid – an improvement of just 5 per cent on its previous offer. Once again, this was firmly rejected by GCap, which said the 202p per share offer "significantly undervalued" the company. Analysts also expressed surprise at the low level of the bid, saying a deal was unlikely unless Mr Allen came back with an offer of at least 220p a share. Mr Allen was clearly listening. Yesterday, Global tabled a new proposal for GCap worth £371m. The 225p- per-share bid is an 11 per cent improvement on its previous offer.
Calling on shareholders to accept the bid and to request the Takeover Panel to extend its deadline until 2 April, Global insisted its offer represented "substantially greater" value than GCap could achieve on its own, even if Ms Hazlitt's hoped-for savings were achieved in full.
The group said: "In Global Radio's view, GCap faces considerable challenges given the current conditions in the radio, advertising and stock markets. The final proposal offers cash and certain value today compared with the inherent execution risk in GCap's strategy."
Mr Allen, 51, is particularly eager to secure GCap after losing out in the bidding for Emap's radio stations, including Kiss and Magic, which were acquired in December 2007 by the German publishing company Bauer, which is believed to have paid about £500m for the radio unit as part of a £1.1bn deal for Emap's consumer magazine and radio businesses.
Roddy Davidson, an analyst at Altium Securities, said: "From a valuation perspective, I think it is a generous offer. One has to bear in mind the fact that, before this whole process began, the GCap share price was something like 130p. GCap is a cyclical business in a structurally challenged industry at a time when advertising revenues are tightening. If I were an investor, I would be very tempted to take the money off the table at the moment."
If Global is successful, it is likely to achieve cost savings by sharing overheads between the former Chrysalis stations and those currently owned by GCap. But Mr Allen and his colleagues do not agree with Ms Hazlitt that it is the right strategy to abandon the digital DAB format – which may have had some teething troubles but is still considered to have great potential by others in the industry, not least Channel 4, which is heading a consortium to launch a second DAB platform with its own-brand radio stations later this year.
Global has also been linked to a possible bid for SMG's Virgin Radio, although if the GCap offer is accepted, it is likely to be too preoccupied for some time. One thing that is certain, Mr Allen is back in the fray, after being forced to quit ITV in August 2006 amid criticism over his leadership. The former accountant from Lanarkshire, who started out as a management trainee at British Steel, before arriving at Granada with his mentor, Sir Gerry Robinson, in the early 1990s, had spent 15 years at ITV and Granada – ten of them as chief executive.
At ITV, Mr Allen was criticised for putting profits before programmes. He presided over a ratings slump that was as much the fault of programme flops such as Celebrity Love Island as increased competition in a multi-channel environment.
An even worse legacy to the broadcaster was contract rights renewal (CRR), a complicated mechanism which Mr Allen agreed to as part of the creation of a single ITV company, which meant that the rates charged to advertisers shrunk in line with the ITV1 audience.
Lisa Campbell, the editor of Broadcast magazine, said: "Mr Allen has a famous reputation as a bean-counter, frequently criticised for focusing too much on cost-cutting and not enough on creativity. He demonstrated a certain ruthlessness during his time at ITV, consolidating the ITV franchises into a single ITV plc, but achieved that by eroding their businesses and weakening their commercial performance, then buying them up as cheaply as possible."
To his credit, Mr Allen oversaw the merger between Carlton and Granada in 2002 – surviving Carlton's Michael Green, who had been expected to head the newly-merged company. Perhaps his greatest achievement at ITV was to negotiate a £135m annual saving in ITV's annual licence fee payments with the industry regulator Ofcom.
"Mr Allen was a consummate politician, extracting larger than expected concessions from Ofcom," added Ms Campbell. "This could well be a postive attribute when it comes to negotiations about the future regulation of the radio industry."
A member of the successful London 2012 Olympics bid team, Mr Allen is a staunch Labour Party supporter who was honoured with a CBE for his community work and has been tipped for a seat in the House of Lords. But the energy with which he has approached the GCap bid shows that, as far as the media industry is concerned, Mr Allen has no intention of bowing out just yet.Reuse content