Capital moves into restaurant business

Capital Radio, the profitable commercial radio company, yesterday turned its back on the overvalued media sector, confirming a much-trailed pounds 51m acquisition of My Kinda Town, the themed restaurants business.

The offer, in cash or in part shares, has the backing of MKT management, speaking for 13 per cent of the company.

Richard Eyre, Capital's chief executive, said the restaurants business would use "many of the skills we have developed in radio". He conceded the move had been unexpected, but claimed there were "obvious synergies between Capital's music and entertainment background and event restaurants".

He said the company intended to cross-promote the Capital Radio brand and therestaurants, which include The Chicago Pizza Pie Factory, Tacos and Beach Blanket Babylon.

Capital, owners of London's most successful commercial radio station, has underperformed the red-hot media sector in recent months, as the market awaited news of the company's strategy. The remaining commercial licences in the UK have been bid up to levels Mr Eyre said were unacceptable, while Capital was considered by many to be too big to be able to win new licences granted by the Radio Authority.

Analysts had been pushing the company to make acquisitions, with other media the favoured option. But Mr Eyre said yesterday: "I'm not sure it makes sense for us to invest in television, say. That market is all about programme making and programme acquisition - those are not our skills."

The acquisition won the support of several analysts yesterday. One said: "I think this is an intriguing move, and it makes sense to take the merchandising brand into new markets." However, Capital's shares fell 16p to 577.5p on the news.

Capital and MKT had already entered into a joint venture to develop Capital Radio Cafe on the ground floor of the radio company's new offices in Leicester Square, London. Additional Radio Cafes are to be launched over the next 12 months.

Comment, page 19

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