GCap rejects improved $660 million Global Radio bid
LONDON (Reuters) - GCap Media GCAP.L, Britain's biggest commercial radio group, rejected an improved 333 million pound ($660 million) bid proposal from suitor Global Radio and won the backing of a major shareholder.
Global faces a March 5 deadline by Britain's Takeover Panel to formally declare its intentions, having pitched conditional offers to GCap first at 190 pence and now 202 pence per share.
GCap said on Friday Global had came back to it the previous day with its revised offer, which again was subject to conditions relating to due diligence and financing facilities.
GCap, headed by new Chief Executive Fru Hazlitt who recently unveiled her growth strategy for the business, noted that Global's new approach did not take account of the savings that could be generated from combining the businesses.
It added that the financing of the approach had question marks over whether it could be completed successfully.
GCap's three leading shareholders are key to the takeover battle given Daily Mail & General Trust (DMGOa.L), Fidelity and Schroders own nearly half of the company's shares. They hold 14.3 percent, 15 percent and 16.1 percent respectively.
When Standard Life's 7.6 percent and Millgate Capital's 6.2 percent are added in, Global is left trying to win over five shareholders who own nearly two-thirds of the company.
"We are a long-term shareholder and happy to wait for plans for current management to come through," said Schroders fund manager Vincent Vinatier, referring to the recent strategy plan outlined by Hazlitt.
"We are happy with the plan. The synergies from merging such businesses have been significant and we don't feel the current offer reflects the value of the synergies," he told Reuters.
Shares in GCap remained steady at 191 pence, reflecting the dilemma investors face in working out whether Global will come back soon with a higher offer for a business exposed to a softening in the UK advertising market.
The European DJ Stoxx media sector .SXMP was 2 percent lower while the FTSE 250 index .FTMC was trailing its opening level by 1.8 percent.
Numis Securities described GCap's rejection of the revised bid as "brave given the certainty of a cash offer" pitched at 25 times forecast 2009 earnings at a time GCap's peers are trading on around 10 times.
Patrick Yau at Ingenious Securities said Global might be stretched to come back with a higher offer and that GCap might have done just enough to stave off a hostile bid.
Altium Securities' Roddy Davidson described 202 pence per share as generous and still feels that 215 pence would be needed to mount a successful bid.
"In the absence of a bid investors are left with a highly rated company involved in a highly consumer sensitive industry and facing the execution risk associated with a radical change of strategy," he said. Continued...
