Capital Radio agrees GWR merger

Classic FM owner GWR and Capital Radio are to merge in a deal creating a company with a 36 per cent share of the UK commercial radio audience.

Classic FM owner GWR and Capital Radio are to merge in a deal creating a company with a 36 per cent share of the UK commercial radio audience.

The tie-up - valuing the new business at £711 million - is expected to generate annual savings of £7.5 million and bring together 56 analogue and 93 digital radio stations.

The move has been backed by media group Daily Mail & General Trust, which owns 29.9 per cent of GWR and had been at the centre of speculation that it could block the deal.

The two groups revealed earlier this month that they were in talks over a merger of equals, generating a combined pre-tax profit of £40 million.

Capital Radio shareholders will own 52 per cent of the enlarged firm, with investors in GWR holding the remaining 48 per cent stake.

Analysts believe the marriage makes strong commercial sense as it will broaden the company's appeal to advertisers and eliminate competition between sales teams.

The merger also presents a direct challenge to the BBC with the enlarged group targeting a higher share of the total UK listenership for commercial radio.

GWR executive chairman Ralph Bernard said: "This merger is a fantastic opportunity to create UK commercial radio's champion of the digital age."

Capital, which claims to reach more than half the UK population, has made no secret of its ambition to expand through acquisitions.

The group's radio stations include Capital FM, Century FM, Capital Gold and Xfm, as well as regional stations such as Red Dragon in South Wales and BRMB in the Midlands.

GWR boasts more licences and a larger audience share than any other commercial radio group in the UK, with stations including Classic FM, as well as 33 local offerings such as Essex FM, Leicester Sound and Trent FM.

Consolidation within the industry has been widely expected following the introduction of the Communications Act, changing the rules governing the merger of radio companies.

GWR and Capital Radio said there were no plans to centralise programming, production facilities or sales for local stations.

"Both companies remain committed to preserving the character of the local networks," they said in a statement.

Following completion of the merger, Mr Bernard will become executive chairman and Capital Radio boss David Mansfield will be chief executive.

GWR revealed today that like-for-like revenues were likely to have risen by 3% during the six months to September 30 in spite of a weaker-than-expected performance in the second quarter, particularly during August.

Radio revenues at Capital Radio during the three months to September 30 are expected to be 4% ahead of a year ago, but the group maintained a cautious outlook for the final three months of 2004.