Northcliffe Moves From Trying To Sell Itself to Buying 25 Regional Newspapers From Trinity Mirror

Around 18 months ago the UK’s Northcliffe Regional Newspapers were put up for sale by its owner Daily Mail & General Trust (DMGT) looking for around £1.5 billion. The bids came in around £1.2 billion to £1.3 billion so DMGT said “no sale.” Since then it has been cutting costs viciously and selling a couple of titles (Aberdeen Press & Journal) and the general thinking was that Northcliffe would try and do the best it could with what it had. No one expected it would actually expand its empire but it has just gone and done exactly that.

Trinity Mirror has announced that Northcliffe is buying 25 of Trinity-Mirror’s weekly regional newspapers for some £64.145 million which represents a multiple of 1.9 times 2006 revenues. In this type of newspaper market, where regional newspapers are struggling hard to maintain their 20% margins via severe cost-cutting, the price is higher than one might have thought. The sale should close by the end of July.

Trinity-Mirror announced last December that to boost its profits and share price it was selling 138 of its 240 regional newspapers plus the national The Racing Post. Analysts had wanted Trinity-Miirror to sell, instead, its ailing national newspapers (Daily Mirror, People, Sunday Mirror) and hold onto the regionals, but the group decided the nationals would come roaring back at some point (they still haven’t).

So now Northcliffe steps up and buys three Trinity divisions which could be as good a prognosis as any for UK regional newspapers. But Trinity-Mirror still has another 113 regional newspapers it wants to flog, with UK media analysts saying they believe the Archant Group might be a buyer for newspapers in the London area and there are several interests, including a possible management buyout, for the newspapers in the Midlands that include the Birmingham and Coventry titles. As for The Racing Post and other sports properties, those sales are discussions with Ireland’s FL Partners for a price said to be close to £200 million.

Trinity says it expects to have all sales completed by the end of Q3. Analysts had predicted beforehand the group would get between £500 million - £600 million for the combined sales and it is on those numbers that Trinity will be judged on how well it may have ultimately done. Shareholders may not see as much cash as they might wish from the sales, however, because of high taxation, debt repayments and pension liabilities.

As for Northcliffe, why did it make the plunge so quickly after taking itself off the market? For the one thing the businesses it is buying generated a £7.3 million profit in 2006 – in other words they are healthy – and Northcliffe managing director Michael Pelosi says the company has transformed itself dramatically since its own sale was called off.  – July 9, 2007

Keywords:UK newspapers

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