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November 21, 2012 8:52 am
A consortium led by a former chief executive of Mecom has agreed a deal to buy Northcliffe Media, the regional newspaper arm of Daily Mail and General Trust, in a move that fires the starting gun on the long-awaited consolidation of the UK’s local press.
DMGT, Trinity Mirror and Yattendon on Wednesday signed a deal to create a media venture called Local World, comprising more than 100 newspapers including the Hertfordshire Mercury and the Derby Telegraph.
The publisher of the Daily Mail, Mail on Sunday and Metro newspapers will receive £52.5m cash for the sale of Northcliffe, as well as a 38.7 per cent stake in the new group.
Other shareholders in the new venture include the Iliffe family, owners of Yattendon Group, who will sell Iliffe News & Media to Local World in exchange for a 21.3 per cent shareholding in the new business, and Trinity Mirror with a 20 per cent holding.
The remaining Local World shares will be purchased by other investors including Artefact Group, an investment fund associated with Lord Ashcroft, the former Conservative party deputy chairman, and Odey Asset Management.
Local World will not have pension liabilities – an issue that has dogged many local newspaper groups – and DMGT said it would contribute an undisclosed proportion of the £52.5m cash towards Northcliffe’s pension fund.
Local World will be headed by Steve Auckland, Northcliffe chief executive. David Montgomery, formerly chief of Trinity Mirror and pan-European newspaper group Mecom, will become an investor in Local World and its chairman.
The new group will comprise 110 newspapers and 63 local content websites, and will have an enterprise value of about £100m.
“We will essentially become a one-stop shop for local content across any platform,” Mr Montgomery said.
The move marks the start of a consolidation that could transform the regional newspaper industry, whose revenues have collapsed over the past decade amid circulation decline, online competition and a fragmentation of advertising spend.
Profits at local newspapers have halved over the past decade as print costs increased, readers migrated to the internet, and classified advertising moved to websites such as Rightmove and Auto Trader.
The UK has about 1,100 regional press titles, down 13 per cent since 2002, according to the Newspaper Society, an industry body, and many daily papers have become weekly publications in order to cut costs.
“Local World will be a comprehensive local content provider, offering the best and most trusted source of news, views and advertising in print, online and mobile to its local audiences in the UK,” Mr Auckland said.
The new group will employ more than 2,800 people and is expected to have annual revenues of more than £200m.
DMGT attempted to offload Northcliffe for an estimated £1.5bn in 2005, but failed to find a buyer. Since then, the group’s valuation has tumbled, and over the past year Northcliffe has axed about 300 staff – some 12 per cent of its workforce.
About 18 months ago, DMGT was in negotiations to sell Northcliffe to Trinity Mirror but the deal fell apart.
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