SMG rejects improved offer from rival UTV

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The Independent Online

SMG, the Scottish media company that owns Virgin Radio, has rejected a sweetened offer from the rival UTV, in a move likely to extinguish prospects of a £400m merger between the two.

UTV, based in Northern Ireland, had made an approach to SMG earlier this month, which was worth significantly more on the stock market on the basis of a 50/50 merger. It emerged yesterday that UTV improved this proposal to give SMG investors 52 per cent of the enlarged group, but this was also rejected.

Analysts said SMG was unlikely to turn around and make a bid for UTV, while the Ulster company will want to avoid going hostile because that would require paying a premium.

Relations between the two companies descended into what observers called a "petty" dispute after SMG said in its statement: "The board of SMG has reiterated its offer to meet with the board of UTV to discuss a potential merger which addresses the factors previously explained to them; that offer has not been taken up by UTV."

The Northern Irish group replied later: "UTV is not aware of any offer from the board of SMG to meet to discuss its proposals, and has had no contact with SMG since 23 August."

It is understood that SMG is willing in principle is consider a merger if it receives 55 per cent of the enlarged company, which reflects its stock market value. However, analysts said UTV believes the SMG valuation is inflated because it is expected to be taken over. On the basis of actual profits, UTV and SMG are expected to produce similar figures for this year and next, which is why the Ulster company thinks a deal closer to 50/50 is fair.

UTV said yesterday it was "currently considering its position". Much depends on the attitude of SMG shareholders, many of whom are unhappy with the company's performance and recently forced out its chief executive.

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