Emap looks to buy radio companies with cash

Emap yesterday ruled out spinning off its radio assets, saying that it would use cash to make radio acquisitions.

There has been speculation that Emap, which also has a large magazine business, would separate its radio interests to give it paper currency to use to merge with another radio business. New legislation, now on its way through Parliament, will allow the big radio groups to merge for the first time.

Tom Moloney, delivering his first set of results as Emap's chief executive, said of the speculation: "That's something we could never see the sense of. In radio, cash is king ... cash makes more sense."

Mr Moloney said that "we'd like to have a bigger radio group", and that Emap had "£500m plus" of funding to make an acquisition. That would be enough to buy any of the other leading radio operators: Capital Radio, GWR and Chrysalis.

Gary Hughes, the finance director, added: "You need cash to buy companies. People distrust the value of paper."

Capital, GWR and Chrysalis would probably need to forge all-paper transactions, but the two Emap executives said that the radio sector's inflated shares would not be acceptable as currency for deals.

Analysts believe that radio shares are too highly rated, trading on forward multiples of 25 or 30, and that the relative valuations of companies in the sector would also prevent deals, with some too highly rated for their size.

Mr Moloney said Emap was the best placed for radio consolidation. "Eventually all roads lead to Emap," he said. "We are the largest plc, we dominate the north of England, and we have great strength of digital radio."

However, he said radio consolidation would not necessarily take the form of a full merger of two big groups, given the problems of getting such deals past competition regulators.

"I don't think it will be a simple, clean deal. It's going to be messy and patchy," he said.

For the year ended 31 March, Emap reported that underlying turnover grew 3 per cent, while normalised pre-tax profit jumped 16 per cent to £175m. The company's magazines include FHM, the men's title, and Heat, a celebrity gossip publication.

Mr Moloney said that Emap was again considering expansion in the US, following its disastrous acquisition of Petersen in 1999 - the business was later sold at a £500m loss. However, this time it would be an "organic" move, such as a stable-mate for FHM, which is already published successfully in the US, or launching some FHM-branded products.

He said that Emap was now in a "growth phase", following the stability that the company needed to recover from the Petersen deal.

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