GCap’s £100m Gamble

Interesting reports in the Telegraph today, that GCap ‘spurned’ (good newspaper term) Global Radio’s £300m offer to buy the company. GCap’s currently worth £200m, so the £300m would have been a 50% premium to the closing share price.

You can understand that GCap wants to give new Chief Exec Fru Hazlitt a bit of a time to, you know, do her new job, but the amounts offered create an interesting quandry. If Global had only offered a premium of 30% you could see it being easily rebuffed as there’s a chance for organic share price growth to that amount, but will GCap be able to manage 50% growth on their own?

Radio’s still going through a tough time and needs to invest in new products to drive future growth – which means no short term gain for the shareholders. If I was a GCap shareholder that came in at £1.20/share, i’d think my best chance of making a few bob was through a sale. Indeed, as a GCap shareholder who came in at about £2.50 (oh, those heady days), i’d be happy to minimise my losses as i’m under no illusion that it’ll ever get back to those heights. However, as with GWR before it, one of the key shareholders in GCap is DMGT. They are kings of long-term thinking, but should they be persuaded to think ‘sale’, a transaction may be quite speedy.

Whilst all of this seems like more bad news for GCap, it’s also pretty bad news for Global Radio as they really are “all dressed up with no where to go” (good quote, Paul Easton). Their whole reason for existing was to buy up and consolidate the industry, it’s the promise that got them all that cash to spend originally. Now, GMG’s stations aren’t going anywhere, EMAP has a new buyer in Bauer (though no one’s exactly sure what their plan is), UTV have no need to sell, CanWest are still in build-out phase, and UKRD/TLRC/Tindle are all a bit too small. Which could mean that it is in fact Global that’ll be on the block for a sale.

2 thoughts on “GCap’s £100m Gamble”

  1. I believe the city underprices GCAP at £200m. You only have to start totting up the earning value of Classic FM, Capital and the One Network to see what a pessimistic assessment this is. Sure, many of their properties are less valuable and some investments may well be significant drains on the group but there are huge market-leading assets hidden in there.

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