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US radio giant Clear Channel to bid for Capital Radio

LONDON - US radio giant Clear Channel is understood to have drawn up plans to bid for Capital Radio, which could cost £500m, once the government relaxes media ownership laws.

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According to reports, Clear Channel, which already has some UK radio interests, will not however make a hostile bid and would not pre-empt the communications bill.

Clear Channel has long been interested in buying a substantial radio company in the UK. Recently it has divested itself of its smaller UK investments, having already sold its 32% stake in Jazz FM to the Guardian Media Group, and is currently negotiating to sell Switch Digital to the Wireless Group and Carphone Warehouse.

Another possible target for Clear Channel, which owns 2,000 US radio stations, is Emap's radio interests, including Kiss FM. There is speculation that it could bid for both radio operators. This was supported by comments made to the Financial Times.

Roger Parry, chief executive of Clear Channel International, told the paper: "There's no point in buying one UK group. The whole point of this is as a consolidation exercise because the resulting stations would be better able to compete with the BBC."

Parry also said that he was sceptical about the current valuations of UK radio businesses, begging the question whether Clear Channel would be willing to pay the estimated £500m price tag that Capital will likely come with, despite currently only being valued at £380m.

The government last week 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.

Interest in Capital follows the radio group's share plunge last week after it reported an 8% drop in full-year profits to £27.8m, reflecting the weakness of the radio advertising market. At one stage, its shares were down 12.4% to 495p.

Speaking to the Sunday Telegraph, Parry said: "We think UK radio is very attractive because it is so very dysfunctional. There are too many radio companies. You are moving toward a single ITV company but there are still eight or nine radio companies."

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