ITV refuses to back SMG fundraising drive

ITV, the biggest shareholder in broadcaster SMG, will not take up its rights in the STV owner's fundraising drive.

SMG is hoping to raise more than £95 million through the rights issue, which was set to close this morning. But in what is being seen as an embarrassing blow to SMG, ITV has confirmed it will not play a part.

The company, which owns just under 17 per cent of SMG, pointed to the company's current share price of 15.25p when explaining its reasons.

"Given where the SMG share price is, ITV has decided not to take up its rights," said a company spokesman.

SMG's shares have slipped from the level before the shares issue announcement, meaning that there is little incentive for shareholders to participate.

The decision by ITV not to participate comes despite it putting heavy investment into turning the business around under chairman Michael Grade.

Despite the blow, SMG will still be able to raise the money it wants because its rights issue is fully underwritten by Hoare Govett.

However, the lack of support is likely to be taken by the market as a sign of ITV's doubts about the longer-term future of SMG.

SMG declined to comment.