SMG, the beleaguered Scottish media group, yesterday admitted that it was in merger talks with its rival, Ulster Television (UTV), about a deal that would give it 46 per cent of the combined company, just weeks after rejecting an offer from UTV that would have given SMG a 52 per cent stake.
In late August, SMG, which has long troubled shareholders with its poor performance and poor strategy, turned down an approach from UTV. The proposal was for an all-paper merger that would give SMG a 52 per cent of the enlarged business.
Then, in September, SMG, which owns Virgin Radio and the ITV franchise for Scotland, warned of "challenging" market conditions and put its smaller businesses up for sale: its Pearl & Dean cinema advertising unit and its billboards division. In October, SMG said it was in danger of breaching its banking covenants.
Yesterday, it announced that it was in talks again with UTV, "regarding a possible nil premium merger of SMG and UTV, based on relative market values". On that basis, a combination of the two companies would give SMG 46 per cent, with UTV now in line for a majority stake of 54 per cent.
Earlier this year, SMG's chief executive, Andrew Flanagan, who had led SMG on a disastrous spending spree in the dotcom boom, was finally ousted, as exasperated investors demanded change. SMG said yesterday that its search for a new chief executive had been suspended "while merger discussions progress". It added: "There can be no certainty that an offer will be made nor as to the terms on which any offer might be made."
UTV, which has the ITV franchise for Northern Ireland, has grown successfully by acquisition. It bought the Wireless Group, which included the talkSPORT radio business, last year. Combining SMG and UTV would provide clear benefits in bringing their two ITV businesses and the radio interests together.
THe radio and television presenter Chris Evans still holds nearly 10m SMG shares, or just over 3 per cent of the company, from his sale of Virgin Radio and his TV company Ginger Productions to SMG for £225m back in 2000.Reuse content