Will DC Thomson heed radio alarm call?

0 Comments | Sunday Herald, The, Jan 7, 2001

IS it all going radio gaga? Scottish Radio Holdings is doing its best to resist the advances of its unwanted suitor, the Sunday Herald's parent, SMG. Its bankers Goldman Sachs have had no difficulty drumming up interest from other media groups now that SRH is in play, but showing an interest is a very different thing to buying the ring and organising the wedding. It may prove very difficult for SRH to find serious alternative buyers, or joint venture partners.

To begin with, the big radio groups can do little more than take minority stakes at the moment. Current legislation, which looks unlikely to change until well after the general election, limits them to a 15% share of the available audience. SRH accounts for over 4%, and GWR is already at 17%, so has no room to manoeuvre. Emap is at 14%, while Capital Radio, at just over 14%, has room for only one more regional licence, and it wants that to be Yorkshire, not the Scottish central belt.

Goldman Sachs has tried to persuade these three national groups to form a consortium and take a minority stake in SRH. The move could block anyone else from buying SRH, thus possibly preventing the creation of a media group big enough to challenge the existing market leaders.

But how to agree on which of the consortium partners would get their hands on SRH once the media ownership rules were relaxed?

Meanwhile, Clear Channel International seems the most likely white knight. The company is interested in buying into Scottish radio, and in getting its hands on SRH's outdoor advertising assets, but as a US company it cannot control a UK plc. Its two most plausible options are to buy SRH in a joint venture with Guardian Media Group, a strategy that failed when it came to bidding for Virgin Radio and Border TV last year, or to try and form a joint venture directly with SRH. The value the latter would bring to SRH shareholders is debatable.

A separate sale of the newspaper assets, some 40 local weekly papers, may help generate more cash for shareholders, in which case DC Thomson or Johnston Press could become players. Johnston has been highly acquisitive for some time now, but not so DC Thomson. Thomson, a privately owned and intensely secretive company, is an unlikely hostile bidder and could shy away from the scrutiny of competition enquiry, which would be triggered if it tried to buy the papers. But as one industry observer put it: "Rip Van Winkle did eventually wake up."