UTV's merger approach to Scottish Media Group (SMG) has suffered a further setback, with the Scottish company saying the bid did not reflect the value of the company.
SMG, which owns Virgin radio among other media assets, has rejected a revised merger approach from UTV that would have given SMG shareholders a 52 per cent stake in the combined company.
The Scottish group said its board had examined a revised merger proposal from UTV but did not believe it reflected the value of the company.
In a statement SMG said its board rejected the revised offer it received on August 22nd for the same reasons it rejected UTV's first offer.
"The board considered the proposal to be unacceptable having regard to the relative market values of SMG and UTV, SMG's prospects and the value of its portfolio of assets."
Despite the negative tone of the statement, SMG left the door open for further talks. It said it would be happy to meet UTV board members to discuss some kind of joint entity, but it said so far UTV had not taken up this offer. UTV refused to comment. It is a major media player in the Republic, owning several radio assets like Dublin's Q102 and Louth's LM FM.
SMG has been in play for some time according to media analysts. A drop in its share price over recent months prompted UTV, led by chief executive John McCann, to contemplate a merger. Mr McCann and his team have been looking to add another UK acquisition to the Wireless Group, which they bought last year.
SMG owns Virgin Radio, most of Scotland's commercial TV network, Grampian TV, as well as cinema and outdoor advertising businesses. It has already rejected UTV's first merger proposal, which suggested shareholders get a 50 per cent stake in the combined company.
A source inside SMG said the feeling at the company was that the ball was very much back in UTV's court and that the onus was on the Belfast-based company to make clear its intentions.
UTV's merger proposal came amid reports that private equity teams are assembling rival bids. Rob Woodward, the former commercial director of Channel 4, is thought to be one of the people interested in making a move for SMG.
SMG has suffered from the tough advertising conditions in the UK. Some industry experts believe a merger would make sense in order to present a more attractive proposition for advertisers. Others believe it is an opportunistic bid by UTV at a time when SMG has seen its share price drop by more than 20 per cent in three months.
SMG - without a chief executive following the departure after a decade of Andrew Flanagan by mutual agreement in July - is worth £238 million while UTV's smaller operation is valued at £194 million. Share prices at both companies fell on the news that UTV's merger proposal had been rejected, although UTV fell further. - (Additional reporting Guardian service)
