Chrysalis, the UK music publishing and radio group, has hired Hawkpoint Partners, the boutique investment bank, to conduct a strategic review of its business.
Confirming a Financial Times article last week, the company said on Monday that it would launch a “wide ranging” review to “assess all options which can deliver maximum value to Chrysalis shareholders.”
Chrysalis’s shares jumped as high as 165½p on the announcement but fell back to stand 1¾p higher at 159p at midday. The shares have rallied more than 30 per cent this year on speculation of a shake-up at the company.
The group said the review would include a potential demerger of the radio and music businesses. Institutional investors, led by Schroders, which owns a 25 per cent stake, have long believed that there is little synergy between music publishing and radio businesses and the two parts are undervalued.
Chris Wright, Chrysalis’s chairman and founder who holds a 26 per cent stake, has been resisting calls for a break-up, but Monday’s announcement signals that he is now willing to sell the radio business and try to retain control the music publishing business.
The review comes as Chrysalis has become the top radio station in London, and has gained the top slot in the capital’s breakfast market in the quarter to December.
Richard Huntingford, chief executive, said in a statement: “The valuable market positions we have created at Chrysalis Radio, coupled with the ongoing consolidation in UK radio, suggest that now is an appropriate time to consider a formal review of our strategic options in this area.
Emiko Terazono writes: Chrysalis has finally made the inevitable decision, but it could have not come at a more difficult time. The radio advertising market is still in a deflationary cycle, and advertisers are more enamoured with the internet.
The timing is also bad on another front - The Guardian Media Group, the most logical buyer of Chrysalis’s radio assets, has just bought Century and Saga and is in the process of consolidating these acquisitions. Tom Moloney at Emap, which is number two in radio, last week stated that the group’s focus was on the high-growth business-to-business sector, and Ulster Television, which is interested in expanding its radio operations in the UK, is still in takeover talks with SMG.
While there is a long list of private equity players interested in a takeout of the music publishing business, Chrysalis can only hope that things in radio get better by the time it finishes its strategic review.
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