Emap and SRH Tie The Knot

Surely Emap could have picked a more appropriate day to announce it was buying the remaining 73% stake in Scottish Radio Holdings (SRH) it doesn't already own? asks Fiona Maharg-Bravo on Breakingviews.com. It was, after all, the same day that two of the UK's biggest radio players, GCap and Chrysalis, said that their advertising revenues had taken a sharp tumble. Moreover, the industry's future doesn't look all that good either.

Yet despite this, the Emap/SRH combination is a good one: both groups have "strong regional franchises with no overlap", says Maharg-Bravo. And the merger has now created the second largest operator, owning 26% of the market share, says Lex in the FT.

The "strategic imperative" is reflected in the price that Emap paid for SRH. At £10.88 a share, the offer is a 25% premium to SRH's closing price before news of the potential merger impacted on the price. That's rather "full", says Lex, albeit below the £11 that SRH shareholders demanded. The acquisition should also hike earnings in the first year, while Emap managed to dump SRH's newspaper business for some £155 at least £10m above what the analysts had expected, says Maharg-Bravo.

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But as radio advertising stumbles, weakening the radio market, and the French and UK consumers rein in their spending, which looks likely to hit Emap's magazine business, the risk for Emap just doesn't want to go away.