The acquisition, revealed in the Independent this week, will bring multi- million pound windfalls for Classic's senior management and marks the first move into radio by EMI, the music group recently spun off from Thorn- EMI, which will end up with 10 per cent of GWR. However, GWR said it would be forced to divest all or part of its interests in up to six local radio stations to satisfy regulatory requirements, including London News Radio where it only recently took management control.
The deal means Sir Peter Michael, the chairman of Classic who backed its launch in September 1992, is set to make a gain in the region of pounds 18m from the sale of his one third stake. He is taking cash and shares giving him a 9 per cent stake in GWR and will also pick up pounds 1.3m for his rights to acquire the transmitters used by the station.
Another big winner will be John Spearman, the chief executive who, it was recently announced, would move up to become deputy chairman. His 5.48 per cent stake in Classic should give him a gain of around pounds 3m on his original investment and entitle him to a 7.3 per cent of the enlarged group. Both men are to stay on as chairman and deputy chairman respectively of Classic, with Ralph Bernard, GWR's chief executive, taking the same position at the station.
EMI described the stake in GWR as a trade investment. It said it was part of its plans to expand in the developing new media for the delivery of music, which as well as music radio includes music television and the Internet. The group already has investments in music television in Germany and Hong Kong.
GWR, which owns 17 per cent of Classic, put together the original licence application and was actively involved in raising finance for its launch, but lacked the means at the time to buy it outright. The opportunity to mop up the rest of the equity came as a result of the decision by Time Warner to sell its 32.7 per cent holding following management changes at the giant US entertainment group and moves to divest some of its overseas interests.
Henry Meakin, GWR's chairman, described Classic as "the jewel in the crown of British commercial radio". He said it was the only FM national network and had the highest national audience of any commercial station with 4.6 million listeners a week. They were also very upmarket, with two-thirds in the ABC1 socio-economic categories.
"In our opinion, that market is going to grow and, in the 12 years of life still left for the station, that will add increasing value," Mr Meakin forecast.
GWR must satisfy the Radio Authority, the industry regulator, that it has met the stringent conditions of the recent Broadcasting Act before the acquisition can go ahead.
The group has agreed to sell 11 per cent of the 31 per cent holding in London News Radio it acquired in February to DMG Radio, part of the Daily Mail and General Trust, which itself owns 19 per cent of GWR. DMGR will also acquire 80 per cent of Leicester Sound, giving GWR total consideration of pounds 16m, plus a possible further pounds 500,000.