SMG has received a morale- sapping piece of pre-Christmas news: its largest shareholder, ITV, has elected not to take part in its major right issue.
The Glasgow media company, which owns ITV's two Scottish franchises, is raising more than £95 million through a rights issue to clear debt. The two-for-one offer, at 15p, was at a heavy discount to the share price at the time of the offer.
SMG is
seeking breathing space to complete a financial turnaround programme. It is looking to reduce penalty banking fees, which could be as much as £20m next year, as well as prevent a distress sale of Virgin Radio, which the group originally planned to sell in the autumn this year.
ITV, which owns just under 17 per cent of SMG, said it had elected not to take part in the programme. A spokeswoman for ITV said yesterday that, "given where the SMG share price is, ITV has decided not to take up its rights".
While the cash call is fully underwritten by Hoare Govett – meaning the cash raising exercise is not in doubt – news that the largest shareholder has decided not to take part will do little to instil confidence in the debt-ridden company, which claimed to have support for the fund-raising.
Originally presented as an offer of cheap shares, SMG has performed so poorly since announcing the fund-raising there is little incentive for existing shareholders to take up the share offer.
SMG shares closed up 0.25p at 15.5p last night.
ITV would have been required to invest about £15m to take up its rights fully, at a time when it is conducting a major cost-cutting exercise.
The full article contains 290 words and appears in The Scotsman newspaper.
