Shareholders not sold on UTV merger MEDIA: SMG

0 Comments | Sunday Herald, The, Sep 17, 2006 | by Steven Vass Media Correspondent

LEADING shareholders in media group SMG believe a takeover by a private equity group would be preferable to a merger with Ulster TV owner, UTV.

It follows speculation that Doughty Hanson might launch a double- headed private equity bid both for SMG and UTV following its recent takeover of Irish commercial television group, TV3.

One of the largest shareholders in Glasgow-based SMG said that such a move would be "at least as favourable" as an SMG/UTV tie-up.

This will be seen in some quarters as a reference to mixed views about UTV in the City, dating back to its GBP98 million takeover of The Wireless Group (TWG) last year. Some investors believe the Belfast company overpaid for TWG, whose stations include talkSPORT and Edinburgh station Talk 107.

The shareholder made it clear, however, that it would still welcome a UTV merger. Such a deal would most likely see UTV chief executive John McCann heading up the new company.

UTV has already proposed nil-premium mergers, valuing the shares in the two companies first at 50-50 and then 52-48 in favour of SMG. The Glasgow company made it clear last week that it would welcome further proposals but value remained a sticking point going into the weekend. With SMG and UTV valued at GBP240m and GBP198m respectively, SMG is understood to see a 55-45 merger as a fairer reflection of their sizes.

SMG also announced that it wants to find buyers for Primesight and Pearl & Dean (P&D), its outdoor and cinema advertising businesses, valuing them jointly at GBP90m. Richard Menzies-Gow, a media analyst at Dresdner Kleinwort Wasserstein, said the businesses were worth between GBP70m and GBP90m, citing JC Decaux and Clear Channel as possible bidders for the outdoor assets.

"The GBP90m SMG talked about is not stupid but it is at the top end of the scale, " he said.

Some analysts suggested these selloffs would pave the way for a UTV merger, since that company has already made it clear that it would sell these assets. Others saw it as a defensive move - a suggestion denied by SMG.

One senior media executive said it was a "shabby defence", since it took away one of the main reasons for private equity firms making a move on the company. He said: "Where's the exit strategy? An obvious strategy would be to aggressively take costs out of Primesight and P&D and sell them at a premium. This is arguably a discouraging move for private equity."

On the other hand the leading shareholder welcomed the plan. It said that it was in line with the previous attempt by former Channel 4 director Rob Woodward to install himself as chief executive.

Woodward is thought to favour making more use of the Scottish and Grampian archives and establishing closer links with Scottish independent producers. The shareholder said: "Perhaps SMG should employ the rest of Woodward's plans."