Scottish media company SMG sold Virgin Radio to TIML Golden Square, part of the Times of India Group, for £53.2-million in cash.
TIML has opted not to buy the Virgin Radio brand, preferring to invest £15-million in new branding and content for the radio station, to be operated by Absolute Radio on behalf of TIM, a spokeswomen reported.
In a statement, SMG said the estimated net proceeds of the disposal are expected to be about £48.7-million, after completion adjustments and transaction-related costs of which £2-million have been already been paid.
Chief executive Rob Woodward said: "I believe that £53.2-million represents a sound price for Virgin Radio and agood deal for SMG shareholders."
He added the proceeds of the sale will be returned as cash to shareholders, with the company expecting to return approximately £30-million, or 3.15p per share before tax, to shareholders. SMG bought Virgin Radio in 2000 for £225-million and attempted a flotation of the radio business last year before the credit crisis forced the company to shelve those plans in favour of a sale.
Virgin Radio has approximately 2.7 million regular listeners across both its analogue and digital platforms. At the end of 2007, Virgin Radio had gross assets and net assets of £68.5-million and £63-million respectively.
In April, SMG wrote down the value of Virgin Radio to £65-million, from £85-million, to reflect a market-based valuation. However, the unit was one of the main outperformers in SMG's full-year results announcement, reporting an 87 per cent rise in operating profit to £4.3-million and gross revenue of £24-million.
SMG has stressed that it was not a forced seller and would not sell if it did not secure the right price for the business.
As part of its turnaround strategy, SMG is also planning to dispose of its Pearl & Dean cinema advertising business, as part of its plans to focus on its Scottish-based broadcasting businesses.
Following the disposal, SMG will repay £15-million to the Bank of Scotland according to the terms of the facility agreement and £4-million to the Scottish and Grampian Pensions Scheme.
SMG said an additional £8-million will become payable if, within two years of closing, the radio business being sold is licensed to use the Virgin Radio brand and if received, total gross disposal proceeds would amount to £61.2-million.
TIML is a wholly owned subsidiary within the Bennett, Coleman & Co Group, part of the Times of India Group.
Aspokeswomen for TIML said that the company is working with an advertising agency to rebrand the station, with the new brand to be launched in the autumn of 2008.
AP Parigi, chief executive of TIML, said: "Now is a great period to be entering the UK market and the opportunity to acquire a valuable radio asset couldn't have come at abetter time."