Capital acquires Virgin Radio

Cathy Newman

Capital Radio yesterday moved to position itself for the pending digital radio battle with the BBC by acquiring Virgin Radio, which was founded only four years' ago by Richard Branson.

Some City analysts, however, believed that Capital had paid a high price for Virgin's two commercial stations, Virgin AM, which broadcasts nationally, and the London rock station, Virgin FM. Assuming debt of pounds 22m, Capital's investment amounts to almost pounds 90m and equates to almost five-and-a-half times revenue.

One analyst said: "Capital does have a phenomenal track record in radio. If anyone could do this deal and get away with it, Capital could."

However, other analysts were relieved that Capital had decided to consolidate its hold on the radio market. The company's diversification into restaurants with the purchase of the My Kinda Town chain last year had caused concern.

Lorna Tilbian, media analyst at Panmure Gordon, said Capital had paid a "very full" price, but she added: "Strategically, Virgin fits in well. It's in Capital's heartland."

Capital is funding the deal entirely in shares. Virgin will be issued with11.87 million Capital shares, giving it a 14 per cent stake in the enlarged group. Mr Branson will join Capital's board as a non-executive director.

Richard Eyre, managing director of Capital, claimed that the deal was "good news for listeners, regulators and advertisers". Mr Branson said the merger allowed both companies to challenge the BBC's "dominance" of digital audio broadcasting .

Virgin AM, in common with the other two national commercial stations, is guaranteed a digital licence next year. Some observers, though, have been underwhelmed by the prospect of digital radio, which, although providing CD-quality reception, does not allow for an increase in the number of stations.

Capital will also seek "further co-operation" with Mr Branson's other business interests, including his overseas radio operations which could eventually be absorbed into Capital.

Cost savings from yesterday's deal will be made by moving Virgin from its location in Golden Square in London's West End to Capital's offices in Leicester Square.

David Campbell, chief executive of Virgin Radio, and Andrew Mollett, the financial director, will leave but will remain with Mr Branson's Virgin Media Group - the newly formed umbrella company which controls Virgin Net, Virgin Radio International, and Virgin Television. Mr Campbell is to work on a digital television project which will launch at the end of the year.

Capital is to change the emphasis of the Virgin stations to attract less mainstream and more male listeners. It will also create a distinct London rock station on the FM service.

Capital will sell airtime for its own and Virgin's stations. As a result, it will withdraw from Media Sales & Marketing, the radio sales house it acquired in 1989. Stations owned by Emap and GWR and currently sold by MS&M will as a result have to seek alternative representation.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions