After weeks of negotiation, Charles Allen’s Global Radio has finally sealed the deal to buy UK commercial radio leader GCap Media, throwing the latter’s recent turnaround strategy in to question. The 225p-per-share offer came after the market closed, just after the takeover panel agreed to extend the deadline by 24 hours – the third such extension – and values GCap at £375 million. Accepted by the board and recommended to shareholders, it’s up on the original 190p-per-share offer and a 86 percent premium on the price prior to the bid.
In February, just eight weeks after taking the job, GCap CEO Fru Hazlitt had unveiled a cost-cutting strategy designed to fend off Global’s bid – it would axe two digital stations, its three regional Xfm stations and sell its stake in the DAB multiplex in order to focus on its core One Network channels and broadband distribution. But the board tonight unanimously accepted the latest offer.
The deal, which takes GCap in to private hands, gives Global massive clout – as well as buying Chrysalis Radio last year for £170 million, it can now marry its portfolio including Heart, Galaxy and LBC with GCap’s Capital, Classic FM and Xfm.
But what this means for the online strategy, which was costed in February 2007, is anyone’s guess. The plan had been to thread new community features and information like travel in to One Network sites, to delivery those stations over multiple platforms and to target mobile platforms like iPod touch and Nokia (NYSE: NOK) Visual Radio. Global stations’ websites are run-of-the-mill but sync up well with GCap’s. In a surprise acquisition, and amid the takeover wrangling, GCap this month bought in to user-driven local listings site Welovelocal to the tune of £600,000, planning to link it to local radio output on-air and online. It’s unclear whether the acquisition would put the break on Hazlitt’s strategy, but it does refer to both digital and analogue. Here’s the announcement to the market.
The deal is happening because GCap had fallen in to difficulty thanks to a declining radio ad market (it may have to clear antitrust hurdles but may be looked upon favourably thanks to the malaise in the business). But for the last few quarters GCap, like newspaper groups, had been bullish, arguing a turnaround was just around the corner. Earlier today, in a trading update that backed up its January prediction, GCap forecast radio advertising revenues for the fiscal year to March 31 would be up three percent year-on-year while online revenue would rise 38 percent, reflecting a 48 percent hike in unique monthly users to two million.