UTV make merger murmurings to SMG

DMC

UTV looking for a marriage with Scottish Media Group, owners of the STV (Scottish TV and Grampian ITV franchises) and Virgin Radio...

UTV makes merger proposal for SMG
http://www.rte.ie/business/2006/0818/utv.html
August 18, 2006 07:27

British media firm SMG said this morning that it had received a merger proposal from Ulster Television.

SMG owns Virgin Radio and operates most of Scotland's commercial television network. It is partly owned by ITV.

Press reports had suggested overnight that UTV had approached SMG about a £400m sterling merger deal.

There has been speculation for several months that SMG could be a takeover target for UTV.

UTV owns the Northern Ireland ITV franchise.

L1011

Ulster Television, eh? Merger deal must be a few months old, as they don't exist anymore

Ulsterman 1690

If this goes ahead I suppose the next thing will be an SMG/ITV merger and programming going even deeper down the toilet

Richard

Ulsterman 1690 wrote:

If this goes ahead I suppose the next thing will be an SMG/ITV merger and programming going even deeper down the toilet

I think we'll see new idents for UTV, consisting of people passing a dirty great big 'U' around the place.

I wonder, however, what the company will be called. Scottish Media and Utv Group (SMUG)?

DMC

SMG say no... sort of...

SMG spurns Ulster TV tie-up, but takeover stays on the table
Compromise deal to create £400m group edges nearer
By Tim Webb
Published: 27 August 2006

http://news.independent.co.uk/media/article1221984.ece

SMG, the media group that owns Virgin Radio, has rejected a merger approach from Ulster TV (UTV).

High-level talks between the two companies are, however, continuing today to thrash out an acceptable proposal that could see UTV taking control of SMG.

It is not expected that SMG will try and buy its rival because the Scottish company has not yet replaced Andrew Flanagan, who resigned as chief executive last month.

An announcement to update the City about the negotiations is expected this week. A compromise deal is understood to be close, which would create a £400m media group.

UTV, which owns talkSPORT radio and operates the ITV licence for Northern Ireland, recently approached SMG about a "nil premium" merger.

This would mean that both sets of shareholders would own exactly half of the new group, even though there is a significant difference in the valuations of the two companies.

SMG, which also operates the two ITV licences in Scotland, has a market value of £243m, while UTV is valued at £187m.

UTV argued that SMG investors should ignore this valuation gap and agree to use their more valuable shares to acquire UTV's cheaper shares.

UTV considers it has better prospects and management than SMG, which would justify this premium.

The board of SMG has refused to accept this proposal. However, it is keen to do a deal if the right terms can be agreed, which is why it has not publicly rejected the proposal. Under the compromise being worked on today, UTV would control the new company.

But its shareholders would end up owning only around 45 per cent, rather than 50 per cent of the new company, to reflect UTV's lower value.

Investment bank Citigroup is advising SMG. UTV is being advised by stockbroker Numis.

UTV appears to be SMG's only serious suitor. ITV, which wants to diversify away from broadcasting, is unlikely to make a bid.

Rumoured private equity interest has yet to materialise in a formal approach for the company.

Citigroup is working on a valuation for the company's wide- ranging assets, which UTV will have to meet.

DMC

UTV's press release...

RESPONSE TO SMG plc BOARD STATEMENT

UTV plc (“UTV”) notes the announcement made today by SMG plc (“SMG”) that its board has rejected UTV’s revised merger proposal. UTV made a revised improved merger proposal to the board of SMG on 21 August 2006, pursuant to which SMG’s shareholders would receive a 52% interest in the merged entity. The board of UTV (the “Board”) is disappointed that SMG has rejected this revised proposal which it believes would be highly attractive from a strategic, commercial and financial perspective and would create shareholder value for both SMG’s and UTV’s shareholders.

UTV has expressed its willingness on a number of occasions to meet with the board of SMG. UTV is not aware of any offer from the board of SMG to meet to discuss its proposals, and has had no contact with SMG since Wednesday 23 August.

The Board is currently considering its position and will make a further announcement in due course.