The offer has the support of the Metro board and its two biggest shareholders, Chrysalis and Capital Radio, which had solicited bids for their holdings earlier this year. It includes a cash and loan alternative in addition to the standard offer of one new Emap share and 1179p for every three Metro shares.
"This would be an excellent fit for us," Robin Miller, Emap's chief executive, said yesterday. Emap is already a significant radio broadcaster, with leading stations in the north of England. He said only one area, Bradford- Leeds, creates an overlap under Radio Authority rules, and Emap would have to sell one station if the offer succeeded.
The bid price values Metro at a multiple of 32.9 times 1994 earnings, a level that did not surprise analysts, given the premium the market has attached to the radio sector in recent months. Mr Miller said the acquisition would be earnings-enhancing in the first year.
Radio is the fastest-growing advertising medium in the UK, expanding by 25 per cent last year and a forecast 15 per cent in 1995. Earlier this year, the Government announced a relaxation of the rules governing radio licences, allowing companies to own up to 35 licences rather than the old maximum of 20. There are also limits on listenership in big markets.
If the bid goes through, Emap will grow to close to its permissible limit, making radio its third-largest source of income after magazines and newspapers. Emap last year earned pounds 63.9m, on turnover of pounds 547m.
Mr Miller said the consolidation of the sector, signalled earlier this year when GWR made a hostile bid for its competitor, Chiltern, was likely to create broad regional franchises akin to independent television. Scottish Radio, which was also interested in Metro, is dominant north of the border, while Emap, with Metro, would lead the north of England. GWR/ Chiltern are strong in the Midlands. The South is dominated by Capital Radio.
Capital, the country's largest radio operator, said it would take cash for its shares for a profit of pounds 13m. Emap would climb to number two position nationwide, with 17 per cent of the market. Mr Miller said national advertisers would be attracted by an enlarged Emap Radio's ability to offer regional scope.
Mr Miller refuted suggestions that Emap was moving away from magazines and newspapers. "Magazines are our heartland," he said. He said Emap would look at the regional newspapers put up for sale last week by Reed Elsevier.Reuse content