MacKenzie gets backing for £100m takeover of Wireless

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The Independent Online

Kelvin Mackenzie, the former editor of The Sun who is regarded as the hard man of the radio industry, has tabled a £100m nil-premium bid to take his Wireless Group private.

Kelvin Mackenzie, the former editor of The Sun who is regarded as the hard man of the radio industry, has tabled a £100m nil-premium bid to take his Wireless Group private.

The private equity-backed deal received the support on Friday of non-executive directors at Wireless, which owns talkSPORT and where Mr MacKenzie is chairman and chief executive.

Their blessing was given despite the fact that Mr MacKenzie's 90p-a-share offer was the same level at which Wireless shares closed on Friday. The company floated in May 2000 at 190p and within the past 12 months its shares have been as high as 114.5p.

It is thought that Mr MacKenzie, 58, will argue that his expansion plans require a level of investment - and consequent hit to profitability - that would not be palatable to the City. Mr MacKenzie is believed to still resent being made to sell off Scot FM, one of his company's most valuable radio stations, to alleviate short-term cash flow concerns in 2001. Wireless has never reported a pre-tax profit but it made an operating profit for the first time in 2003.

Once it is private, Wireless is likely to take on the BBC to an even greater extent by building up a network of local speech stations. The company is also likely to argue that although the shares did trade at the offer price by Friday, the stock has been considerably lower in recent times. It hit 70p in October.

Mr MacKenzie already has the support of more than half the shareholders, however. The biggest Wireless shareholders - Rupert Murdoch's News Corporation and Liberty Media, a US group - are backing the bid. Liberty owns 26.7 per cent and News Corp 24.5 per cent, while Mr MacKenzie himself owns 6.4 per cent of the company.

Among institutional shareholders, SG Asset Management and Jupiter are the two leading investors, with stakes of more than 3 per cent each.

Mr MacKenzie's bid is being financed by Veronis Suhler Stevenson, a US private equity group that specialises in the media sector. VSS owned Centaur, a business magazines group that floated last year.

The offer values the ordinary shares at £75m, plus a further £20m for the B-shares owned by News Corp. Wireless declined to comment yesterday but a statement confirming the bid approach is expected to be made by the company today.

The non-executive directors at Wireless are Stephen Davidson, an investment banker with WestLB who used to run the UK cable group Telewest; Graham Hollis, a former chief financial officer of Liberty Media; Richard Linford, the chief financial officer of News International, a subsidiary of News Corp; and Patrick Cox, the chairman of In-Flight Entertainment Services.

Wireless, which owns the talkSPORT national analogue station and a number of local stations, specialises in the speech-only format. It is a second-rung player in the consolidating radio sector, with 6 per cent of the radio advertising market. It is bidding for the new FM licences being awarded by the media regulator and it was the surprise winner in December of a licence for Edinburgh.

Mr MacKenzie is best known in the radio industry for his unsuccessful battle to force the sector to immediately change the way it measures audiences for stations, from a manual survey to an electronic system. He believes the traditional manual method underestimates the listeners for speech formats including talkSPORT.

The speech-only format is unpopular in the commercial sector and Wireless's principal competitor for audience is the BBC, which dominates the speech segment nationally with Radio 4 and Radio Five Live. The BBC also has local speech stations.

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