THE owner of the Daily Mail agreed to sell its local newspaper arm yesterday to a new business led by tabloid veteran David Montgomery in a deal that spawns a new player in regional publishing.
Daily Mail and General Trust (DMGT) is selling its 80-plus papers stable, Northcliffe Media, for £52.5 million to the new joint venture, called Local World, which will also include the newspaper assets of small regionals group, Iliffe News & Media.
DMGT will take a near-39 per cent holding in Local World, while the Iliffe family, owners of Yattendon Group, will have a 21 per cent stake in return for the inclusion of its 36 titles.
Trinity Mirror, also one of the UK’s biggest local paper groups as well as owner of the Daily Mirror, has paid £14.2m for a 20 per cent stake in the new combination. But it is not currently selling any papers to it.
Local World, worth about £100m, will have seven million online users and a weekly newspaper readership of six million, through over 100 titles and 60 websites.
Among its titles will be Northcliffe’s Bristol Post, Derby Telegraph and Leicester Mercury, together with Iliffe’s Cambridge News and Hertfordshire Mercury.
Montgomery, a former boss of Mirror Group Newspapers, who has a City reputation as a cost-cutter, said the transaction “signals the fightback in Britain’s regional media industry”. Local World said it was too early to quantify any possible redundancies from the deal.
“Monty”, as he has been styled, will be chairman of Local World. Steve Auckland, chief executive of DMGT’s regional arm, will be chief executive.
The move comes as local papers have faced a lengthy advertising slump during Britain’s four-year economic downturn and rising competition from the web. This has forced many groups to axe titles, turn some regional dailies into weeklies and axe jobs. However, Montgomery said Local World would be “unencumbered by the infrastructure of the industrial past such as property, printing presses and large-scale distribution or any legacy issues such as high levels of debt”. Steve Liechti, media analyst at Investec, said the sale price agreed by Northcliffe was “not a huge amount in view of its history, but realistic given today’s industry pressure”.
Other investors in the new company will include hedge fund Odey Asset Management and Artefact Group, an investment fund linked with former Conservative Party deputy chairman Lord Ashcroft.
Martin Morgan, chief executive of DMGT, said: “The media industry has been waiting for this logical next step for regional newspapers,” Local World will employ over 2,800, with combined operating profits of £21m and revenues of £273m.
Ashley Highfield, chief executive of Johnston Press, one of the major players in Britain’s regional newspaper business and owner of The Scotsman, said recently he believed industry consolidation was necessary.
However, Highfield said Johnston’s priority was paying down debt and growing the business organically.
Newsquest, the other big regional newspaper group in the UK, has not commented on Montgomery’s new venture.
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