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Radio group shares rise on merger and ad recovery talk

LONDON - Classic FM-owner GWR led a rise in the shares of the UK's radio groups today, following discussions in the industry that has reignited talk about consolidation in the sector and raised hopes about an advertising recovery.

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GWR was up 9.9% at 3.40pm to 233.5p, the day after it held a dinner with analysts.

Reports suggest that although the company did not announce any news at the meeting, the upbeat tone of the directors boosted confidence about the company's prospects in the City.

Analysts at HSBC said it gave greater "explanation and clarity" about the restructure of local radio, which "provides more confidence that GWR should outperform its peers in the future".

GWR is also said to be best placed to take advantage of the Communications Act, which has relaxed media ownership rules to allow consolidation in the industry.

The company also echoed comments made by WPP chairman Sir Martin Sorrell that there were encouraging signs appearing in the ad market.

Heart FM-owner Chrysalis rose 2.8% to 205.5p, while Emap, another company expected to be on the prowl for acquisitions, was up just less than 1% to 859p, after finance director Gary Hughes moved to extinguish consolidation talk at a press briefing yesterday, when he said that although the Act would relax ownership rules, competition regulations could still get in the way.

Capital Radio, owner of 95.8 Capital FM and new-music station Xfm, jumped 5.2% to 557.5p. The company has just had its shares status raised from "neutral" to "sell" by investment bank Merrill Lynch.

Capital has been linked to talk of a takeover by US giant Clear Channel.

However, Capital managing director David Mansfield has recently been locked in a war of words with the chief executive of Clear Channel, Roger Parry, and stamped out suggestions that Capital could be taken over by its US colleague.

Speaking at the Radio Festival in Birmingham last month, Mansfield sparked a row when he said the US group was only concerned with selling burgers and cars.

Mansfield's comments came in response to a question from BBC director general Greg Dyke, who asked how Capital would react if Clear Channel made a bid for Capital once the communications bill became law and permitted such a deal.

Parry hit back at Mansfield in an article in the Sunday Times, saying it was not the job of chief executives to rule out mergers, but shareholders.

"I am surprised that a chief executive would close doors to his shareholders in this way and I am sure that a number of his shareholders would have raised their eyebrows," Parry said.

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