SRH stands firm against Emap's threat of hostile bid

Emap tried to kick-start its efforts to buy Scottish Radio Holdings (SRH) yesterday by revealing the board of its smaller media rival has rejected an indicative offer worth £374m.

Emap tried to kick-start its efforts to buy Scottish Radio Holdings (SRH) yesterday by revealing the board of its smaller media rival has rejected an indicative offer worth £374m.

Emap, which owns 27 per cent of SRH, said it was "disappointed" with the company's reaction to its proposed offer and warned it might launch a hostile bid below the £10.40-a-share level it had previously indicated it would be willing to pay. At the end of March Emap issued a statement expressing its interest in acquiring SRH.

SRH's shares jumped 14.6 per cent yesterday on hopes of an imminent deal, but ended at 1,001p, reflecting fears that Emap may carry out its threat of launching a less valuable bid.

However, SRH remained adamant last night that it would not give in to Emap's tactics, insisting the £10.40-a-share indicative offer "significantly undervalued" the business.

It said the Emap bid failed to attach any value to its recent acquisitions of the Vibe commercial radio stations and was pitched at an earnings multiple that was well below other recent deals in the radio sector, such as Capital Radio's merger with GWR.

However, Emap, whose chief executive is Tom Moloney, said its indicative offer accurately reflected SRH's future prospects. "The board of Emap is disappointed by this reaction to a proposal which it believes fully values SRH, both on the basis of its current performance and its future prospects, as well as crystallising a premium for control," an Emap statement said. "SRH's share price has not closed at or above £10.40 since June 11, 2001." With a white knight bidder unlikely to emerge given Emap's 27 per cent stake in SRH, it appears that a stand-off has been reached.

A statement from SRH said: "SRH has been a consistently strong performer in the radio sector on operational and financial metrics over the last five years and this performance has continued into the current year.

"The board of SRH is confident about the independent future of the company and believes SRH is well-placed to continue to generate significant long-term shareholder value."

Emap's attempt to buy SRH is the latest corporate action in the commercial radio sector over the past year. New legislation at the beginning of 2003 opened the way for radio mergers but it was not until September last year that Capital and GWR agreed to merge, a deal that has only recently been completed.

However, the pace of change has picked up recently with the buyout of the Wireless Group and the attempted bid for Virgin Radio by Lord Alli. Analysts are also waiting to see what happens to Chrysalis, the radio group behind Heart FM, in which Schroders has built up a 26 per cent stake.