Rob Woodward, the former commercial director of Channel 4, is preparing a private equity-backed £280m counter-bid for SMG, the Scottish media business that received a 50/50 merger offer last week from the Northern Irish rival UTV.
The move comes as UTV, which is worth significantly less than SMG, is poised to sweeten its proposal. Although SMG has stated that it is considering the UTV offer, it is understood that there is no chance that SMG could accept a 50/50 all-paper deal. That is because SMG is worth considerably more on the stock market than UTV.
The Ulster company is understood to be willing to take as little as 45 per cent of the combined £400m group. This would be achieved either through a revised offer from UTV, or, more unusually, the company has in effect invited SMG to turn around and make a bid for UTV.
However, even with 55 per cent of the combined group, SMG shareholders would only be receiving a proportion of the enlarged business that is in line with its stock market value. Private equity would offer a premium and a cash exit for shareholders.
SMG owns STV, which runs the ITV franchises for Scotland, Virgin Radio, Pearl & Dean cinema advertising, and the Primesight billboards business. UTV has the ITV franchise for Northern Ireland and a radio business that includes the talkSPORT national station.
The ITV franchises held by both companies and the radio interests - both Virgin and talkSPORT are male-orientated national stations - provide strong industrial logic for a merger. UTV's management, led by chief executive John McCann, is well regarded, in contrast with the top brass at SMG.
Mr Woodward was the favourite choice of some leading SMG investors to replace Andrew Flanagan as the chief executive when Mr Flanagan was ousted in a shareholder revolt last month. He had the backing of the fund manager SVG, which has a 5 per cent stake in SMG, and also it is thought Fidelity, which has 15 per cent.
However, given the UTV bid announced last Friday, Mr Woodward has had to try to turn his candidacy for the chief executive job into an offer for SMG. He had planned to break-up SMG if he was made chief executive anyway, a strategy that is also likely to appeal to private equity.
Mr Woodward, who declined to comment, is thought to be in talks to put together private equity backing.
3i made a £100m offer for SMG's Virgin Radio business last year which was rebuffed. The private equity house is an obvious partner for Mr Woodward. Others that could mount a bid for SMG include Permira, Candover, CVC and Cinven.Reuse content