Emap and SRH Tie The Knot

published 9 June 2006

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.