Bidders pick up GCap signals

Interest revived in Capital FM owner as strategy shift hits share price
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The Independent Online

Tom Schoonmaker, the former chief executive of Emap Performance who is fronting a bid from Australian investment bank Macquarie, is heading the queue of suitors for the owner of Capital FM.

Other private equity groups who had run the rule over the company in the summer also now believe that a bid is possible after the share price plunged by more than a fifth to close at 268p on Friday. These groups include Cinven and 3i.

GCap chief executive Ralph Bernard, announcing the group's maiden interim results, sparked the share price rout when he said that he would cut the number of adverts on its flagship station, Capital FM, by half but would not increase advertising rates. The move marks an attempt to halt the London station's decline in listening figures, which have halved in six years. Analysts cut their profit forecasts for the next two years as a result. Mr Bernard also slashed the dividend by half for this year.

Bid interest in GCap began over the summer as it reported worse-than-expected ad revenues and former chief executive David Mansfield was ousted from the board. But the speculation drove up the shares, scaring off suitors.

Anthony de Larrinaga, an analyst at Société Générale, said: "GCap faces an extremely uncertain next six months." It will not know if cutting adverts on Capital FM boosts listening figures until ratings body Rajar reports first- quarter figures next spring.

Shareholders are not calling for the departure of Mr Bernard. But with no good news expected soon, they will listen to offers. Private equity sources said a buyer would look to keep its stronger brands, such as Capital FM and Classic FM, and sell its weaker-performing regional stations.

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