SALE OF VIRGIN RADIO TO TIML

RNS Number : 6972V

SMG PLC

30 May 2008

30 MAY 2008

SMG PLC

PROPOSED DISPOSAL OF VIRGIN RADIO

TO TIML FOR CASH CONSIDERATION AT COMPLETION OF £53.2 MILLION

Key Points

The upfront cash consideration of £53.2 million represents a successful outcome from the sale process.

The estimated net proceeds of the disposal are expected to be approximately £48.7 million (after completion adjustments and transaction-related costs of which £2 million has already been paid).

SMG will repay £15.0 million to Bank of Scotland pursuant to the terms of SMG's facility agreement and £4.0 million to the Scottish and Grampian Pensions Scheme. In addition to these payments, SMG expects to retain £1.7 million to provide additional headroom and flexibility and to return approximately £30 million to shareholders, representing approximately 3.15 pence per share (before taxation). Details of the proposed return of cash to shareholders will be announced in due course.

Additional consideration of a further £8.0 million will become payable if, within two years of closing, the radio business being sold is licensed to use the 'Virgin Radio' brand (beyond 90 days post completion of the sale). If this additional consideration is received, total gross disposal proceeds would amount to £61.2 million.

All of the directors of SMG who hold shares in the Company as well as UBS Global Asset Management, Hanover Investors Partners and RC Brown Investment Management plc, who at the date of this document, account for, in aggregate, approximately 31.6 per cent of the issued share capital of SMG, have irrevocably undertaken to vote in favour of the disposal at the General Meeting.

The disposal is subject to the approval of SMG's shareholders at a General Meeting notice of which will be posted to SMG shareholders shortly.

Commenting on the proposed disposal, Rob Woodward, Chief Executive of SMG, said:

'I believe that £53.2 million represents a sound price for Virgin Radio and a good deal for SMG shareholders. The disposal of Virgin Radio is consistent with our overall strategy and the proceeds of the sale will allow us to return cash to shareholders, as well as further strengthen an already healthy balance sheet.

In the last fourteen months we have refocused SMG by disposing of non-core businesses, significantly reducing debt, delivering on KPIs and providing SMG with a strong platform for growth. Having successfully achieved our corporate turnaround, we are fully focused on our Scottish based broadcasting businesses, where we continue to see positive momentum. We are already delivering growth through our core Scottish assets and stv has continued to outperform the ITV network, both in national sales and in regional sales. We expect regional sales to continue with continued double digit growth in June.

I would like to wish the management team and all the employees of Virgin Radio the best of luck for the future and I am sure that the business will continue to prosper under TIML's ownership.'

Commenting on the proposed purchase of Virgin Radio, A.P. Parigi, CEO of TIML, said:

'TIML is part of the largest media and entertainment organisation in India with a proven track record of building powerhouse brands. Now is a great period to be entering the UK market and the opportunity to acquire a valuable radio asset couldn't have come at a better time. We are pleased to once again be working with a great team of UK-based radio experts, Absolute Radio, which not only has a wealth of radio management experience but also, importantly, shares our passion for developing a new kind of music and entertainment offering for the modern radio consumer. By harnessing local creative brand building talent and the skills of the award-winning Golden Square team, we are excited about taking the business to the next level, expanding the diversity, variety and number of consumer touchpoints and revenue opportunities for all of our stakeholders.'

Enquiries:

SMG PLC

+44 20 7882 1199

Rob Woodward, Group Chief Executive
George Watt, Chief Financial Officer
Debbie Johnston, Head of Communications

Jefferies International Limited

+44 20 7029 8000

Julian Culhane

Toby Ramsden

Hoare Govett Limited

+44 20 7678 8000

Sara Hale
Stephen Bowler

Brunswick Group LLP

+44 20 7404 5959

James Hogan
Simon Sporborg
Ash Spiegelberg

Virgin Radio

+44 20 7462 3317

Cat Macdonald

TIML Golden Square Ltd

Joyce Lorigan, Head of Communications

+44 7786 603582

Hill & Knowlton

+44 7796 955659

Stuart Smith

Jefferies International Limited is acting exclusively for SMG and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than SMG for providing the protections afforded to customers of Jefferies International Limited or for providing advice in relation to the matters described in the announcement.

Hoare Govett Limited is acting exclusively for SMG and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than SMG for providing the protections afforded to customers of Hoare Govett Limited or for providing advice in relation to the matters described in the announcement.

30 MAY 2008

SMG PLC

PROPOSED DISPOSAL OF VIRGIN RADIO

TO TIML GOLDEN SQUARE LTD FOR CASH CONSIDERATION AT COMPLETION OF £53.2 MILLION

Introduction

SMG plc (SMG) is pleased to announce the disposal of Virgin Radio Holdings Limited and its subsidiaries (Virgin Radio) to TIML Golden Square Ltd (TIML) for a cash consideration at completion of £53.2 million. Additional consideration of a further £8.0 million will become payable if, within two years of closing, the radio business being sold is licensed to use the 'Virgin Radio' brand (other than during the 90 day period following completion of the sale). If this additional consideration is received, total gross disposal proceeds would amount to £61.2 million.

The disposal is subject to the approval of SMG's shareholders at a General Meeting notice of which will be posted to SMG shareholders shortly.

Background to the disposal

As stated in June 2007, and again at the time of SMG's rights issue in November 2007, the Board believes SMG's future lies in its television broadcasting, content and ventures operations. Prior to the rights issue in November 2007, the Board explored the possibilities of both a sale and an initial public offering of Virgin Radio, but felt that a disposal of Virgin Radio at the prices being offered at that time would not have been in shareholders' interests.

Since the rights issue, and consequently from a position of greater strength, SMG has conducted a thorough auction process as a result of which Virgin received an offer from TIML Golden Square Ltd which the Board believes fairly values Virgin Radio. The disposal of Virgin Radio will enable SMG to reduce debt, return cash to shareholders and focus on its core business. Whilst Virgin Radio remains an attractive radio business, the Board believes that a sale of Virgin Radio to TIML is consistent with SMG's overall objectives.

Virgin Radio

Virgin Radio is one of the UK's leading commercial radio businesses based on weekly reach, with approximately 2.7 million regular listeners across both its analogue and digital platforms. Virgin Radio's principal radio station broadcasts on an analogue signal under an AM licence nationwide and an FM licence in the London area as well as on a number of digital platforms. In addition, Virgin Radio operates digital-only radio stations, including Virgin Radio Classic Rock and Virgin Radio Xtreme. The radio stations are available online at www.virginradio.co.uk.

In connection with the disposal, TIML has elected to cease using the 'Virgin Radio' brand. Accordingly, the business will be launched under a new brand in the Autumn of 2008.

For the year ended 31 December 2007, Virgin Radio reported gross revenue of £24.0 million and audited profit before tax of £4.3 million. As at 31 December 2007, Virgin Radio had gross assets and net assets of £68.5 million and £63.0 million respectively.

TIML Golden Square Ltd

TIML Golden Square Ltd is a wholly owned subsidiary within the Bennett, Coleman & Co Ltd group, India, operating in Radio, Out-of-Home, Experiential Marketing and Filmed Entertainment businesses. It is part of The Times of India Group (TOI Group), one of India's largest media and entertainment organisations. TOI Group has a proven track record in building some of the world's largest brands across print, television, radio and internet such as Times of India, Economic Times, Times NOW TV, www.indiatimes.com and Radio Mirchi. TOI Group has a JV with BBC Worldwide Ltd and publishes titles like Top Gear, Hello and Grazia.

Principal terms of the disposal

Under the terms of the sale and purchase agreement, which was signed on 30 May 2008 SMG has conditionally agreed to sell Virgin Radio to TIML Golden Square Ltd. The Consideration for the disposal shall, subject to adjustments described below, be:

£53.2 million payable in cash on completion; and
a further £8.0 million if, within two years of closing, the business being sold is, by agreement with Virgin Enterprises Limited, carried on using the 'Virgin Radio' brand (other than during the 90 day period following completion).

Following completion, the consideration shall be adjusted on a pound for pound basis by reference to the difference between the estimated and actual amounts of debt, cash and working capital contained within the business at completion, in each case as set out in the sale and purchase agreement.

The disposal is conditional on the approval of SMG's shareholders. A circular containing a notice convening a general meeting of SMG shareholders at which a resolution to approve the disposal will be proposed will be sent out shortly.

All of the directors of SMG who hold shares in the Company as well as UBS Global Asset Management, Hanover Investors Partners and RC Brown Investment Management plc, who at the date of this document, account for, in aggregate, approximately 31.6 per cent of the issued share capital of SMG have irrevocably undertaken to vote in favour of the disposal.

Completion of the disposal is expected to occur by 30 June 2008.

SMG has agreed to pay TIML a break fee of up to £750,000 in the event that SMG shareholders do not approve the disposal at a general meeting of SMG Shareholders by 30 July 2008.

Financial effect of the disposal and the use of disposal proceeds

The estimated net proceeds of the disposal are expected to be approximately £48.7 million (after completion adjustments and transaction-related costs of which £2 million has already been paid). Virgin Radio is profitable and SMG is receiving cash consideration from TIML Golden Square Ltd; it is therefore expected that the disposal will be earnings neutral. SMG will repay £15.0 million to Bank of Scotland pursuant to the terms of SMG's facility agreement and £4.0 million to the Scottish and Grampian Pensions Scheme. In addition to these payments, SMG expects to retain £1.7 million to provide additional headroom and flexibility and to return approximately £30 million to shareholders, representing approximately 3.15 pence per share (before taxation). Details of the proposed return of cash to shareholders will be announced in due course.