Schroders piles on the pressure at Chrysalis

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The Independent Online

Schroders, the fund manager, said the constituent parts of the Chrysalis media business are undervalued, fuelling speculation that the group's second-largest investor is looking to see the company broken up.

Schroders, the fund manager, said the constituent parts of the Chrysalis media business are undervalued, fuelling speculation that the group's second-largest investor is looking to see the company broken up.

A stock exchange announcement yesterday revealed that Schroders had bought more Chrysalis shares. It now has a stake of more than 25 per cent in the group, whose sizeable radio assets include the Heart brand. The fund manager, a long-term holder of Chrysalis, has increased its stake from 15 per cent to 25 per cent in recent weeks.

Rosemary Banyard, a fund manager at Schroders, said: "We're increasing our stake because we believe that the shares are undervalued. Both the main businesses are undervalued."

There has been intense speculation in the media industry that Schroders plans to use its increased stake to force a break-up of Chrysalis, which also has a small books business that is already up for sale. MsBanyard declined to comment on the rumour but added that it was not unusual for Schroders to hold stakes of up to 25 per cent in companies.

Some in the sector have suggested that her colleague, Andy Brough, a high-profile and forthright fund manager at Schroders, has decided to take on the Chrysalis board, which is led by founder and chairman Chris Wright, who also owns 25 per cent of the company.

Analysts claim Mr Wright is reluctant to see his company broken up and that, given the size of his shareholding, he could block anything he did not want. It is the main reason cited in the City for Chrysalis' failure to participate in the wave of consolidation under way in the radio sector.

There have been reports of heated conversations between Schroders and Chrysalis but sources close to the media company insisted yesterday that relations remain "friendly".

Analysts reckon the music businesses - where recent hits have included albums by Athlete and Feeder - is worth about £150m. A valuation of more than £260m is put on the group's radio assets alone, before accounting for their strategic value to another radio player.

Chrysalis' shares were unchanged yesterday at 172p, valuing the group at £289m.

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