Competition Commission order to sell stations in seven regions means Global could struggle to recoup half of £70m outlay
Global Radio may be lucky to recoup half the £70m-plus it cost to buy GMG Radio, the owner of the Real and Smooth networks, in the face of a forced sell-off of stations in a very limited buyers market.
When Global Radio acquired GMG Radio in June last year in an 11th-hour bidding frenzy against arch-rival Bauer, it bought stations in nine UK regions accounting for 47.3m hours of listening per quarter, according to the most recent Rajar figures.
On Tuesday, the Competition Commission ruled that Global must sell stations in seven of the nine regions, accounting for 40.5m of those advertising-critical minutes, 86% of the total acquired, due to competition concerns.
The stations unaffected by the competition ruling, in London and the West Midlands, account for just 6.8m of the total minutes of Real and Smooth Limited, the newly-minted name for GMG Radio.
The UK's largest radio operator has the choice of potentially selling some of its own radio stations in the affected areas – there is an industry rumour it may look to sell-off the Capital stations in some northern areas and keep the Real network intact and rebrand it to Heart – but nevertheless, the view is that this has become something of a disaster for Global.
"It is about as bad an outcome as they could have imagined," said one senior radio industry executive. "They would have spent millions on legal fees on top of the purchase price, they may be lucky to get half what they spent back."
The problem for Global is that it is now a forced seller in a market that is not flush with rivals which might bid decent prices for the stations it must sell.
Global's acquisition of GMG Radio, the third biggest player in the UK, left thwarted rival bidder Bauer and TalkSport-owner UTV Media as its main competitors.
The Competition Commission has made it clear it requires three major radio players in each UK region to provide adequate competition, and that Bauer will probably not be able to compete for much of Global's fire-sale as it too has a "large number" of overlaps with GMG's radio footprint.
"Based on our assessment of this evidence, we considered it likely that an acquisition by Bauer of [Real and Smooth Limited] would have met the test for reference to the Competition Commission," the regulator said in its report. "This is based on the large number of overlaps between Bauer and [Real and Smooth Ltd] stations, including in particular the significant competitive overlap between their stations in Scotland."
The view of one legal expert is that Global's gamble on taking on all the risk of competition fall-out to seal a deal with GMG Radio – which is usually shared with the seller until after a deal is completed – is not looking like it will pay off.
"The interesting thing for me is that Global took on all the risk on this deal going sour," said a senior radio industry source. "The starting point on deals with clear competition issues is to only complete after an investigation, to share the risk, and the risk they took doesn't seem to have worked out so far."
Bauer is thought to have bid between £55m and £60m for GMG Radio, while UTV Media is thought to have submitted a significantly lower offer.
With Global's two other main competitors either mostly out of the running, or not likely to value GMG Radio's former assets as highly as Global, there is a large risk it will struggle to make back its money on the fire sale.
The Competition Commission has allowed Global to look at what it calls a "partial divesture" of some of the stations, meaning it will allow a commercial deal where it licenses the existing station's brand name to the new owner.
Offering this deal could help entice more buyers into the sale, spreading costs and offering an already well-known brand.
However, the over-riding view is that with Global's plan to buy GMG Radio outright all but thwarted, senior executives at German-owned Bauer will be breathing a sigh of relief.
"This is a real life line for Bauer," said one radio industry source. "They are the second biggest player in the UK, but the GMG Radio deal would have left them so far behind Global it wouldn't have been a real two-player battle."
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Global Radio may be lucky to recoup half the £70m-plus it cost to buy GMG Radio, the owner of the Real and Smooth networks, in the face of a forced sell-off of stations in a very limited buyers market.
When Global Radio acquired GMG Radio in June last year in an 11th-hour bidding frenzy against arch-rival Bauer, it bought stations in nine UK regions accounting for 47.3m hours of listening per quarter, according to the most recent Rajar figures.
On Tuesday, the Competition Commission ruled that Global must sell stations in seven of the nine regions, accounting for 40.5m of those advertising-critical minutes, 86% of the total acquired, due to competition concerns.
The stations unaffected by the competition ruling, in London and the West Midlands, account for just 6.8m of the total minutes of Real and Smooth Limited, the newly-minted name for GMG Radio.
The UK's largest radio operator has the choice of potentially selling some of its own radio stations in the affected areas – there is an industry rumour it may look to sell-off the Capital stations in some northern areas and keep the Real network intact and rebrand it to Heart – but nevertheless, the view is that this has become something of a disaster for Global.
"It is about as bad an outcome as they could have imagined," said one senior radio industry executive. "They would have spent millions on legal fees on top of the purchase price, they may be lucky to get half what they spent back."
The problem for Global is that it is now a forced seller in a market that is not flush with rivals which might bid decent prices for the stations it must sell.
Global's acquisition of GMG Radio, the third biggest player in the UK, left thwarted rival bidder Bauer and TalkSport-owner UTV Media as its main competitors.
The Competition Commission has made it clear it requires three major radio players in each UK region to provide adequate competition, and that Bauer will probably not be able to compete for much of Global's fire-sale as it too has a "large number" of overlaps with GMG's radio footprint.
"Based on our assessment of this evidence, we considered it likely that an acquisition by Bauer of [Real and Smooth Limited] would have met the test for reference to the Competition Commission," the regulator said in its report. "This is based on the large number of overlaps between Bauer and [Real and Smooth Ltd] stations, including in particular the significant competitive overlap between their stations in Scotland."
The view of one legal expert is that Global's gamble on taking on all the risk of competition fall-out to seal a deal with GMG Radio – which is usually shared with the seller until after a deal is completed – is not looking like it will pay off.
"The interesting thing for me is that Global took on all the risk on this deal going sour," said a senior radio industry source. "The starting point on deals with clear competition issues is to only complete after an investigation, to share the risk, and the risk they took doesn't seem to have worked out so far."
Bauer is thought to have bid between £55m and £60m for GMG Radio, while UTV Media is thought to have submitted a significantly lower offer.
With Global's two other main competitors either mostly out of the running, or not likely to value GMG Radio's former assets as highly as Global, there is a large risk it will struggle to make back its money on the fire sale.
The Competition Commission has allowed Global to look at what it calls a "partial divesture" of some of the stations, meaning it will allow a commercial deal where it licenses the existing station's brand name to the new owner.
Offering this deal could help entice more buyers into the sale, spreading costs and offering an already well-known brand.
However, the over-riding view is that with Global's plan to buy GMG Radio outright all but thwarted, senior executives at German-owned Bauer will be breathing a sigh of relief.
"This is a real life line for Bauer," said one radio industry source. "They are the second biggest player in the UK, but the GMG Radio deal would have left them so far behind Global it wouldn't have been a real two-player battle."
• To contact the MediaGuardian news desk email media@guardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".
• To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook. Reported by guardian.co.uk 1 day ago.