Capital Radio makes £132m white-knight bid for Border

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The Independent Online

Capital Radio yesterday came to the rescue of Border Television, the Scottish radio and TV broadcaster, with an agreed £132m all-share offer.

The move was expected to see Border, which operates the third-smallest ITV franchise and radio stations across northern England, escape the clutches of Scottish Radio Holdings. SRH, which raised its bid to £131m on Tuesday, urged Border shareholders yesterday to take no action while it pondered a yet-higher bid.

Capital's all-share offer valued Border last night at £132m, or 1,218p a share, after its stock lost 135p or 9.9 per cent to 1,325p. The £13 cash alternative values the group at £141m. Border shares closed up 35p at 1,317.5p.

"Capital's number one strategic aim is to raise its analogue radio business in the UK," the chief executive, David Mansfield, said. "This group of stations is almost as good as it gets." Border has three Century adult contemporary licences in the North-west, north-east and the Midlands and SUN FM in Sunderland.

Analysts said the deal would be dilutive for Capital but acknowledged it would enhance its future growth. With the new stations, Capital will get crossing-selling opportunities through its national sales force, while Century will provide it with a growing radio brand.

In the year to April 1999, Border had operating profit on continuing operations of £2.4m on sales of £19.9m. For the six months to October, Border had sales of £11.5m and operating profit of £1.7m. "Border will be earnings dilute for Capital and the feeling is there could be another bid from Scottish Radio," Lorna Tilbian, analyst at WestLB Panmure said. "But a lot of shareholders will be interested in the cash offer in this kind of market."

Under Capital's friendly offer, Border chairman James Graham would continue to head the Carlisle-based group. Capital also said it would develop the group's TV business, overturning speculation that those assets would be sold on.

"Capital recognises the value of our businesses and they also came forward with a very strong plan for the future, particularly with regard to the Century brand which we feel will become a very important part of Capital's portfolio," said Paul Corley, chief executive of Border. SRH, whose shares eased 37.5p to 1,500p, could make a higher offer, although analysts doubted it could out-muscle Capital.