Prospects of a merger between UTV and Scottish Media Group (SMG) were dashed yesterday when UTV said trends in the UK television market had caused it to abandon the idea.
There was significant speculation over recent weeks that the two companies were about to seal a deal. But the offer from UTV has now been withdrawn. The development will come as a major disappointment to chief executive of UTV John McGann who is anxious to see UTV become a major player across the UK market.
UTV has been in a strong expansionary phase over the last two years in the Republic and Britain. It already owns the Wireless Group, owner of TalkSport.
It said its decision to withdraw its interest was based on SMG's interim results, announced last week and the ongoing weakness of the advertising market in the ITV network. As a result of its announcement, UTV cannot make a bid for SMG for six months under City takeover rules, unless there is a "material change of circumstances".
However, UTV said it reserved the right to make an offer for SMG if the Scottish company's board recommended it or there was an offer from a third party. There has been some speculation that a private equity group, including Doughty Hanson, might make a bid for SMG.
Shares in SMG, which owns Virgin Radio and the two ITV franchises in Scotland, fell 8 per cent after the UTV announcement. The potential merger of the two companies has been occupying both boards for some time. Most of the focus has been wrangling between the two companies over what percentage of shares each side would own.
However, the prospect of a tie-up between the companies receded after both sides made cautious comments about a deal and SMG put its Pearl & Dean and Primesight advertising operations up for sale.
SMG's total underlying revenues were down 2 per cent to £88.6 million in the first six months of 2006, with television revenues the only division to record a drop, down 7 per cent to £57.9 million. It is understood UTV does not want exposure to the UK television market at this stage and that was a key consideration in it abandoning the deal.
The company blamed the drop in revenues on the contract rights renewal system plus, a weak advertising market and the phasing of production commissions.
