SMG, the Scottish media company, has put its Pearl & Dean cinema advertising business and its billboards unit up for sale, as it continues to resist an unsolicited merger offer from its rival UTV.
The move was seen as defensive by many, though the company insisted it was part of a longer-term strategy to concentrate on those assets that had the potential to drive internet traffic. SMG also owns the Scottish franchise for ITV and Virgin Radio, a national station aimed at men.
Reporting half-year results yesterday, Donald Emslie, the acting chief executive, said: "This is certainly not a knee-jerk reaction. We started planning this [divestment] at the end of last year."
The company had previously claimed the cinema and outdoor businesses were integral to a strategy of offering advertisers a range of national media on which to put ads, from television to billboards.
SMG has been under pressure since UTV proposed a merger last month, initially on a 50/50 basis, then in a structure that would give the Scottish company 52 per cent of the combined company. Mr Emslie said he was willing to talk to UTV again but "provided discussions start at fair value", indicating a 55/45 deal.
The Pearl & Dean business is well known - not least for its "pa-pa-paa" jingle - but this loss-making venture is not considered to be anywhere near as valuable as the outdoor advertising business that was also put on the block.
Richard Menzies-Gow, an analyst at Dresdner Kleinwort, estimated the outdoor sale could raise £50m to £60m. He added: "Cinema is more difficult as it is losing money and there are few obvious buyers. The brand is what it will be marketed on - we think it could fetch anywhere from £10m to £30m."
Pearl & Dean has some 25 per cent share in a market that has only one competitor, Carlton cinema advertising. In the first six months of the year, Pearl & Dean made a loss of £300,000 on turnover up 5 per cent at £8.5m. SMG warned that "we anticipate another tough year for Pearl & Dean".
Group pre-tax profits were up 19 per cent at £8m after a reduction in financing costs. The outdoor advertising division produced profit uplift of 33 per cent to £1.6m. Virgin Radio profits dropped £500,000 to £3m on higher marketing costs and television profits fell 4 per cent to £9m, as ITV struggled to attract viewers and advertising revenues.