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ITV already sells airtime for SMG and speculation has indicated that ITV is eyeing up SMG's two Scottish terrestrial franchises Grampian TV and Scottish TV. It had been thought that the broadcaster would somehow try to wrest the properties from SMG, without making a full bid for the company.  
 
Earlier this month, SMG issued a profits warning and signalled that it was in discussions with its lenders about renegotiating its debt covenants. Shares in the company plummeted by over 28% on the news to just above the 55p mark.

SMG blamed the profits dip on the weak market for TV and cinema advertising, affecting its Scottish TV franchises and its cinema advertising sales business Pearl & Dean.

The company is currently trying to negotiate a sale of Pearl & Dean, along with its out-of-home advertising company Primesight. Up to 40 bids are believed to have been tabled for the properties from interested media owners. 

It has also been reported that non-executive directors at SMG had rebuffed an attempt to replace Chris Masters, the chairman of the group, with former chief executive of Scottish Radio Holdings Richard Findlay, by the second largest shareholder at the group, Fidelity Investments.

Fidelity currently owns a 15% stake in the group, while ITV owns 17%.
 
Last month, the company released results for the first half of 2006. SMG's pre-tax profits climbed 19% year-on-year from £6.7m to £8m, while turnover fell 7% from £94.9m to £88.6m.

TV revenues fell while radio and online revenues grew, and SMG said it expects this pattern to continue in a "challenging" second half of the year. In July this year, Andrew Flanagan, who had been chief executive of SMG for 10 years, stepped down from his position at the firm.

In August, SMG received a merger proposal from Irish media group UTV that would have seen them unite as one company valued at around £400m.

SMG rejected the initial proposal as well as a second offer more favourable to its shareholders, and UTV walked away in September following the publication of SMG's first-half results.

Donald Emslie, currently chief executive of SMG's television business, is currently acting chief executive while the recruitment process to find a replacement gets under way.

Fru Hazlitt, current chief executive of Virgin Radio, is reported to be one of the candidates mooted for the role. 

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