Battle erupts over Metro Radio stakes

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The Independent Online

A new battle in the radio bid war is set to begin with the announcement that two large stakeholders in Metro Radio, the Newcastle radio group, are selling their shares.

Capital Radio has appointed SG Warburg to sell its 18.1 per cent stake, and Chrysalis, the music and media company, has appointed NM Rothschild to dispose of its 19.5 per cent stake through an auction on 29 June.

Sources close to the sellers' advisers say the list of potential bidders, which includes more than 40 companies, is topped by CLT, the Luxembourg- based radio company, and Emap, the British media group.

David Grigson, finance director of Emap, said the company had been pleased by an 184 per cent increase in the group's revenues from radio and could not rule out a bid for Metro.

Others in the running include British newspaper groups that have recently received permission to bid for radio companies. These include the Guardian and the Daily Mail and General Trust. Television companies might also enter the battle for one of the last of the smaller independent radio stations.

The moves follow a change last month in the cross-media ownership rules announced by Stephen Dorrell, the National Heritage Secretary, which gave media companies greater freedom to own businesses in more than one media industry.

The new rules were expected to lead to greater consolidation in the fragmented radio industry. They were quickly followed by a bid from GWR, the Bristol- based independent radio station, for Chiltern.

A boom in radio advertising and the application of new broadcast technology have encouraged media giants to turn their attention to radio.

Last week, Metro said profits in the six months to 31 March had increased from pounds 1.66m to pounds 2.05m on turnover that had risen 83 per cent to pounds 11.7m.

Eric Lawrence, finance director, had disclosed his interest in bidding for one or more of four new regional licences to be advertised shortly.

Attempts to price the shares on the basis of other recent radio deals have produced estimates of 525p to 621p. The shares moved up 1p to 478p.

Chrysalis said it was selling its shares after the success of its recently launched Heart radio led to a decision to focus on its own radio interests. Capital said it was selling to focus on businesses where it had a direct input.