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DMG Radio's sale of stake in GWR could spark bidding war

DMG Radio is considering selling its stake in GWR Group, owner of Classic FM. City analysts said yesterday a sale by DMG would spark a bidding war for GWR, one of the biggest commercial radio players in the UK.

DMG, which is owned by Daily Mail and General Trust, is GWR's biggest shareholder, with a 19 per cent stake worth pounds 37m. Other broadcasters could be interested in buying GWR, although many would have monopoly problems. GWR would also attract interest from regional press publishers. The radio group, which last night had a market value of pounds 194m, could be worth around pounds 250m.

GWR would probably be broken up after a sale. Some of the stations broadcasting on AM could be sold separately.

DMG would not comment yesterday but market sources confirmed a sale of the GWR stake was being considered.

The news comes almost exactly a month after EMI, the music group, bought 4 million GWR shares, taking its stake in the company to 13.58 per cent. Industry observers said yesterday that EMI had increased its shareholding after market rumours that DMG was to sell out. EMI is highly unlikely to launch a bid for GWR.

EMI bought the shares after Capital Radio sold its 13 per cent holding in GWR, raising pounds 28m. Capital said it wanted to focus on wholly owned radio stations. EMI is now GWR's second-largest shareholder.

GWR has underperformed the market by nearly 30 per cent in the past year. The shares were unchanged last night at 178.5p.

Rumours have circulated in the City for some weeks that DMG's parent, which also owns the Daily Mail newspaper, was gearing up for a big acquisition. A sale of the GWR stake adds credence to that theory.

DMG's attempts to become a significant commercial radio player in the UK have so far been thwarted. At the beginning of the year, the company failed in its bid to buy 80 per cent of Leicester Sound because of competition concerns. DMG has instead focused on other countries where regulatory problems do not arise.

Last month, the company spent A$88m (pounds 40m) acquiring 25 AM and FM stations in Australia.