GCap shareholders miss out after radio station sale is pulled

The strategic U-turn came five months after the company unveiled plans to sell the stations, leading to suggestions that management botched the process.

Shares in GCap fell 10 per cent at one point after it also revealed revenues for the year to March would be 13 per cent lower than in the previous 12 months. They closed down 7p at 235p.

City analysts had believed the assets would fetch up to £50m but the highest bid received was nearer £30m. There was disquiet in the City at GCap's decision to handle the sale itself, rather than appoint banking advisers.

GCap said in a statement: "The board does not believe it would be in the best interests of GCap's shareholders to sell these businesses at the level of the offers received ... the sale process has been terminated."

A GCap spokesman said: "These weren't loss-making stations. They weren't a burden, they were all profitable." He denied shareholders were angry at the loss of a special dividend that would have been paid on completion of the deal.

Fidelity and the Daily Mail Group, the largest shareholders with 14 per cent each, offered no comment. Ralph Bernard, the chief executive of GCap, declined to be interviewed.

Potential buyers and their advisers were said to be fuming, having spent considerable time and money preparing bids for businesses they assumed would be sold. GCap said it has not had any official complaints.

At least one analyst was sympathetic to the company. Paul Richards, of Numis, said in a note: "It is pointless pushing ahead with a sale if it destroys value. They have done the right thing. It is tough out there." GCap, which owns Capital FM and Classic FM, was formed from the merger of GWR and Capital.

The nine analogue radio stations it had planned to sell include Coast FM in north Wales and Plymouth Sound.

GCap blamed weak advertising conditions and audience drop-off at "core heritage stations" for the expected fall in revenues this year. The "inevitable disruption" after the merger was also a factor in the reduced results, it said.

Last year the radio group decided to halve the amount of time spent on commercials at Capital FM during the day, a move it claimed was sparked by consumer research.

Advertisers are thought to like the decision not to play more than two ads in a row on Capital FM, but it does not appear to have had the desired effect on listeners. The station's audience numbers are down from 2.9 million in 2001 to 1.8 million.