GCap Media plc has officially started trading today. As part of the condition of the merger between GWR and Capital, the newly formed GCap Media plc had to dispose of 106 Century FM serving the East Midlands by 8am today.
Chrysalis Group plc announces that it has agreed to acquire 106 Century FM from GCap Media plc for a cash consideration of ?29.5 million. It is no secret that Chrysalis will re-brand the station to Heart, creating a consistent brand across the midlands, matching 100.7 Heart FM in the West Midlands.
The transaction is being funded partly by way of a new bank facility from The Royal Bank of Scotland and partly from Chrysalis?s internal cash resources.
Background to, and reasons for, the Acquisition
The acquisition of 106 Century FM is consistent with Chrysalis Radio?s strategy of investing in radio licences covering large metropolitan and regional markets where there are good opportunities for audience and revenue growth. Chrysalis intends to rebrand 106 Century FM using its successful Heart brand, which is already the commercial market leader in both the West Midlands and London. The following strategic and financial benefits have been identified:
? 106 Century FM is a profitable, well-established broadcaster whose audience demographic is both attractive to advertisers and very similar to Heart?s target listenership.
? 106 Century FM has shown strong audience growth, most recently in the Rajar Q1 figures released on 5 May 2005.
? The acquisition will create a leading branded adult contemporary radio broadcaster across the East and West Midlands, with a transmission area of approximately 5.25 million adult listeners. The coverage area substantially matches the core of the Central ITV region, and is highly attractive to national and local advertisers.
? The opportunity to grow audiences in the East Midlands towards the levels enjoyed by 100.7 Heart FM in the West Midlands. Despite its strong recent audience growth, 106 Century FM?s weekly reach, at 17 per cent substantially lags the 25 per cent. weekly reach of 100.7 Heart FM in the more competitive West Midlands market. 106 Century FM?s market share, at 7.4 per cent., also lags the 8.4 per cent. enjoyed by 100.7 Heart FM.
? The opportunity to increase significantly 106 Century FM?s yield, particularly in the national marketplace.
100.7 Heart FM currently enjoys advertising yields 30 per cent. higher than 106 Century FM on a per hour listened basis, demonstrating the yield benefit that can be derived from association with Chrysalis?s flagship Heart 106.2 London station.
Additional economies of scale across Chrysalis?s radio business, providing an opportunity to improve margin as well as revenue growth.
Given the complementary nature of the Heart and 106 Century FM formats, Chrysalis does not anticipate any issues arising from the OFCOM review of the format change. Nor does Chrysalis anticipate any competition issues with the acquisition, although this transaction is conditional on OFT clearance.
Commenting on the transaction, Chrysalis Chief Executive, Richard Huntingford, said:
?106 Century FM is a great strategic fit for Chrysalis and it will make an excellent addition to our radio business.
The combination of 100.7 Heart FM in the West Midlands and 106 Century FM in the East Midlands will strengthen our branded radio network in this important region. It also extends our national presence, which is increasingly attractive to advertisers.
?This acquisition is consistent with our strategy of growing our radio business by acquiring high quality, complementary assets that provide an opportunity to create additional long term shareholder value.?
Phil Riley, Chief Executive of Chrysalis Radio, added:
?Both of our existing Heart stations, in London and the West Midlands, are market leaders, and we are always looking for ways to develop the brand into new regions The addition of 106 Century FM to our radio business is an excellent opportunity to do this. 106 Century FM and Heart have traditionally targeted the same important demographic and, based on our success in the West Midlands, we believe that there is considerable potential to
grow both audience and yield.?