Capital to take over Virgin Radio

Britain’s leading commercial radio group Capital Radio is to take over rival Virgin Radio, in a 64.7m deal which promises to alter radically the sales structure of commercial radio.

Capital Radio, announcing the deal this week, immediately signalled its intention to abandon its sales house Media Sales & Marketing (MSM), which currently handles 40 per cent of national advertising sales for other local commercial stations across Britain.

Once the deal is finalised, a new sales division, Capital Sales & Marketing, will handle airtime sales for Capital FM, Capital Gold, Virgin AM’s national service, and Virgin FM’s London-wide station.

Capital Radio’s group commercial director David Mansfield says he anticipates that other stations in which Capital holds majority shareholdings will be brought into the new sales division.

But EMAP Radio and GWR are expected to withdraw from the restructured group. Mansfield insists that Capital’s divestment in MSM will be handled carefully, to ensure an “orderly market” for the sales house’s client stations.

The move may mark an end for the time being of third-party brokerage of radio time by independent sales houses.

Although Katz International and SIRS continue to represent a number of stations, most commercial airtime will now be sold in-house by Britain’s leading radio groups.

“The deal reflects the view that the money to be made in radio is from operating stations rather than selling airtime,” says David Fletcher, head of radio at CIA Medianetwork.

Financial details of the deal reveal that Capital will take on 22m in debt from Virgin Radio. Richard Branson’s Virgin group receives a 14 per cent interest, valued at 64.7m, in the enlarged Capital Radio.

David Campbell, chief exe cutive of Virgin Radio, will leave the company to head Virgin’s New Media ventures when the merger is completed.

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