YooMedia plc has announced the acquisitions of Digital Interactive Television Group and The Gaming Channel, creating a major force in interactive television in the UK. The company proposes to fund the acquisition through a share issue.

YooMedia has agreed to acquire the entire issued shares of DITG and The Gaming Channel, subject to shareholder approval.

The acquisition is valued at up to £28 million, paid for by the issue of 120 million ordinary shares, £5.3 million in cash and the repayment of loans totalling £4.7 million.

YooMedia proposes a further share placing which aims to raise £25 million, of which £10 million will be used to pay for the cash element of the acquisitions and the balance will be used for working capital for the enlarged group.

The consolidation of the companies will create an interactive business second in size only to BSkyB, covering everything from public service government information to chat, dating and gambling.

The combined turnover of the companies would have been a little over £61 million in the past year.

“This merger creates a powerhouse with market leadership in the independent interactive digital industry,” said Michael Sinclair, executive chairman of YooMedia in a prepared statement.

“Together we have the brands, content, distribution, technical know-how and the relationships with platforms and broadcasters to satisfy the increasing appetite for interactive applications in TV, radio mobile and on the internet.”

DITG chairman John Swingewood added: “The enlarged group will have a significant impact on the interactive media landscape in Britain and shows that we now have an industry that has come of age and can exploit the fast-growing demand for our services.”

John Swingewood, who founded DITG and The Gaming Channel in 2001, was previously Director of New Media at BSkyB. He will join Dr Michael Sinclair and Dr David Docherty on the board of the enlarged company as vice chairman and executive director. Neil MacDonald will become deputy chief executive, while Damian Cope will be managing director for gaming and games.

DITG provides software and infrastructure for digital interactive television channels, including the only third-party commercial alternative to Sky for activating the return path from a set-top box. The system is used by Zip Television for interactive advertising, among other applications.

The Gaming Channel provides fixed odds and casino style gambling channels. It operates bingo-style gaming channel Avago and the William Hill channel.

YooMedia describes itself as one of the fastest growing interactive television companies in the UK. It recently acquired MMTV, which holds the contract to deliver the NHS Direct interactive television service. The business also includes the fixed-odds bingo-style gaming company FancyaFlutter.

The sums involved in the acquisition are comparatively small, a long way from the heady heights of the dot com boom, when companies were being bought for silly money, often never to see a return.

To fund the acquisition, YooMedia is resorting to a deeply discounted share issue, with 166.7 million shares priced at 15p, a third below the price they were trading at when news of the negotiations leaked a fortnight ago.

Effectively, the deal gives DITG representation on the London Alternative Investment Market without having to go to the market independently.