It would be a merger of equals, even though the embattled SMG’s market capitalisation is about £46m (€67.5m) greater than UTV’s. The Scots are poised to reject the tentative approach, but McCann’s timing could yet prove judicious.
SMG has had a difficult time of late. The recently departed chief executive, Andrew Flanagan, has yet to be replaced; the UK advertising market is in a slump; and SMG’s share price has fallen by 25% since June.
But UTV is unlikely to have the field to itself. The tone of SMG’s announcement suggested to many that it might be inviting others to table competing offers. Private equity firms are reported to be swarming over SMG to launch a bid.
Cash-strapped ITV holds 17% of SMG’s shares, and given its difficulties it might welcome a third-party bid as a chance to cash in its chips.
SMG has a 26% share of peak-time television viewing in Scotland, where it has the ITV franchise. It also owns Virgin Radio, a London-based station with a national AM licence, and Pearl & Dean, a cinema advertising group, and the television production company Ginger Productions.
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The private equity houses are likely to look to break up SMG, and who better than UTV to pluck choice assets?
Adding Virgin to the Wireless Group, which UTV bought last year for £98m, would make the Irish company one of the big three radio players in the UK.
McCann has his marker down. This story has some way to run yet.
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Celtic scores a debt pile trick
THEY say football is a funny old game and so it proved for Celtic plc last week. An embarrassingly early defeat in qualifying for the Uefa Champions League knocked £4.6m off its revenues yet the club managed to reduce its debt pile by £10m.
This neat financial trick was made possible by a £15m cash call among Irish financier Dermot Desmond and his fellow investors. Desmond now owns 41% of the club, an investment he has always said was one dictated by his heart rather than his head.
Evidence of Desmond’s vast experience in business can be taken from the fact that the club made a £3.7m profit from its day-to-day operations. Only a £5.8m loss on player trading and a hefty interest bill pushed the club into the red.
Most of the top earners have been moved on, a lucrative shirt sponsorship deal with Nike was agreed, and this helped to push up merchandising sales by 29% to £14m.
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It’s all heartening stuff for investors, even if fans of the Bhoys would prefer Desmond to loosen the purse strings and strengthen the squad.
The results statement makes no mention of the club’s desire to join the English Premiership. It’s about six years since Desmond first went public with his desire for the Auld Firm to join the Sky- (and now Setanta-) financed jamboree down south. His dream shows no signs of being fulfilled.
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Eircom dodges share mayhem
EIRCOM shuffled off the market last week, at least for the time being. It exited with the sound of telecom stocks falling right across Europe.
The culprit was Deutsche Telekom (DT), which suffered a 10% fall in its share price, its largest one-day drop in four years. The stock plummeted after a profit warning and dragged most of Europe’s leading telecom players with it.
Safely cocooned by the offer from Babcock and Brown and the preceding bid speculation, Eircom’s share price has been protected for the best part of a year.
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DT’s problems were related to intensifying competition, not generally considered to be a problem for Eircom. It also cut its forecasts for 2007, suggesting that it is not expecting any let-up in the struggle.
On Wednesday, Swisscom, once a suitor for Eircom, also guided earnings downward. It is also facing increased competition from cable operator Cablecom. Its results were affected by a fine for overcharging rival companies connecting to its network.
DT still has many Irish shareholders, the legacy of an €80m share placement by NCB in 2000. The good news for these shareholders is that the German company, despite its woes, is committed to paying out the same dividend as in 2005.
Refocus puts Icon in full view
SOME good news last week for investors in Icon, a Dublin-based group that provides clinical research to most of the world’s top 20 pharma companies.
In a note to clients last week, stockbroker Davy said a visit to the company’s central labor-atory operations in America had increased its confidence that the turnaround in that business has been “successfully executed”.
The lab operations have been a drag on the group for the past couple of years. This was due to problems with service quality and a lack of marketing focus, according to Davy. It was remedied by a refocus on volume growth, adding to its sales team and by increasing the leverage with Icon’s clinical division.
Expansion is also planned. The Dublin facility has been given an extra 25% space and a presence in Singapore is planned for the end of this year.
Davy’s 2007 forecasts assume that the lab division generates profit before interest and tax of $5.2m (€4.1m) on revenues of $58.9m. The broker suggests that the lab division could now add 5-10% to the group’s forecasts.
The market seems to be alive to the turnaround. The share price has risen by about 50% since the start of the year.