Emap, which already owns the Kiss FM and Magic radio stations, has according to reports asked investment bank Lazards to look at the implications of a possible deal, which would include advising as to whether the deal would likely win regulatory approval.
Capital has been the subject of intense media speculation in recent weeks. Two weeks ago, US radio giant Clear Channel was reported to have drawn up plans to bid for Capital, which could cost between £450m and £500m despite currently only being valued at £380m, once the government relaxes media ownership laws.
Earlier this month, the government confirmed in the Queen's speech that the communications bill would relax media ownership laws, allowing operators to own as much as 55% (up from 45%) of a local market. It is thought that under the new legislation an Emap bid would likely succeed.
The deal would give Emap control of both Capital Radio and alternative music station Xfm and is seen as a good fit by industry analysts. It would bring the Capital stations together with Emap's own radio assets and its magazines, which include Heat, and its growing band of music TV channels, which include Smash Hits TV and Kerrang!.
A bid would also satisfy concern about Emap's radio business, which currently accounts for around 16% of the UK radio market. Analysts have been suggesting that it should either expand this through acquisition or it should pull out and concentrate on its magazine and TV business.
According to an Emap spokesman quoted by the Sunday Express: "Capital has definitely been looked at and must be seen as an option." However, like Clear Channel, Emap would be unlikely to make a bid before the communications bill is passed next year. Emap would also be unlikely to make a move before it selects a new chief executive.
Interest in Capital follows the radio group's recent 8% drop in full-year profits to £27.8m. Capital was dragged down by the weakness in the radio advertising market, which has in turn hit its share price.
If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the .
.jpg)
.jpg)