SMG, the media group, has confirmed plans to sell Virgin Radio to Absolute Radio for £53.2 million, as the new owner has said that it will undertake a £15 million rebranding exercise.

The announcement of the deal follows lengthy discussions between Absolute, a private company, and its Indian backer – The Times of India – SMG and Virgin Group, which has the right not to allow the brand to fall into the hands of those that compete with Virgin businesses anywhere in the world.

Times Online revealed on Wednesday the surprise decision by Absolute and its Indian backers to buy the radio assets without the Virgin Radio brand. It had been thought that Absolute Radio would not want to buy Virgin Radio if it could not keep the Virgin brand. Virgin Radio owns an FM licence in London and an AM national licence.

Virgin Radio was expected to be sold by late April, but competition issues have delayed completion of the sale. Virgin Group has a joint radio venture with the Hindustan Times, where it uses the Virgin Radio brand, while Absolute’s backer is TIML, owned by Bennett, Coleman, which also owns radio stations in India. Virgin had been concerned that it was confusing for two Indian businesses to have a relationship with Virgin Radio.

Sources close to Absolute and Bennett, Coleman insisted yesterday that they did not want the Virgin brand because they were concerned about having any potential restrictions on their expansion plans.

The decision to invest £15 million in establishing a new brand demonstrates Absolute’s plans to develop a serious presence in the British radio market. The new business will be relaunched by Albion, the marketing group that launched the Innocent Smoothie drink brand.

Separately, it has emerged that Virgin Group, which owns Virgin Radio in European and Asian countries, is keen to reclaim the brand and launch a British station, possibly on DAB, and possibly with a partner.

SMG is selling Virgin Radio to concentrate on its television businesses, which include STV in Scotland and Ginger Productions. SMG acquired the radio business alongside Ginger Productions from Chris Evans, the broadcaster, in 2000 for £225 million.

Absolute Radio is run by Donnach O’Driscoll, who will be chief executive of the new company.

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