SMG has completed a the sale of Virgin Radio to a group backed by Indian media giants TIML for £53.2 million.
More than a year after the company announced its commercial radio business was up for sale, Absolute Radio has been announced as buyers of the group.
The company originally paid £225m for Chris Evans' Ginger Media, which included Virgi
n radio, in 2000 but SMG chief executive Rob Woodward said last night that the £53.2m represented "a sound price for Virgin Radio and a good deal for SMG shareholders".
He added: "The disposal of Virgin Radio is consistent with our overall strategy and the proceeds of the sale will allow us to return cash to shareholders, as well as further strengthen an already healthy balance sheet"
Last night's deal comes at a major discount to the £100m plus flotation the company hoped the business would yield when it deemed the business "non-core" last April.
When it pulled the float in favour of a private sale, the company said it hoped to received £60m-£70m for the business.
However, a spokeswoman said, given the market conditions for media assets, SMG was pleased with the outcome.
The deal has been made without the use of the Virgin Radio name, after Sir Richard Branson, owner of the Virgin Group, did not give blessing to the high- profile branding.
But, as part of the sale, SMG will yield up to a further £8m if the new owners can negotiate the use of the Virgin Brand.
TIML Golden Square is expected to invest £15m in rebranding the stations.
It chief executive, AP Parigi, 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 a better time."
From the sale price, £30m will be returned directly to shareholders of the SMG group, which holds the ITV franchise for Scotland. This follows a major rights issue to pay down debt last year after the company delayed the sale of Virgin.
Last night, SMG was not commenting on the method of returning cash to shareholders, although a major share buyback is expected, while a special dividend is also possible.
SMG will pay back £15m to Bank of Scotland as part of its debt agreements, and a further £4m to its pension fund.
Another £1.7m will be retained to give the business "additional headroom and flexibility", the company said in a statement.
The sale of the commercial radio station leaves the company close to its target of a specialist television business.
Last year SMG off-loaded Primesight, the billboard advertising business, for £62m.
It is also negotiating a sale of cinema advertising business Pearl & Dean. However, that business is locked into an onerous deal with Vue Cinema, which guarantees revenues, so it is unclear if SMG will receive proceeds from the deal.
SMG gives the company a nil value on its balance sheet.
The deal is subject to shareholder approval, although institutions representing more than 30 per cent have already agreed.
