DMGT shares tumble as it decides to keep Northcliffe

by Daniel Farey-Jones, Brand Republic 17-Feb-06, 10:10

LONDON – Shares in the Daily Mail & General Trust tumbled more than 10% this morning after it decided against selling its Northcliffe regional newspapers when offers from the three bidders fell short of the £1.5bn price tag it was seeking.

Having hoped to generate as much as £1.5bn from the auction of the business, DMGT admitted that the offers it received had not met expectations. In keeping the division, it said it planned to undertake further cost-cutting.

However, despite committing itself to cost-cutting its shares were down by 10.8% by 10.10am this morning, falling 80.5p to 665p.

The three bidders are believed to pitched offers in the region of £1.2bn. They remain anonymous but are believed to include the private equity team of CVC and Candover, as well as another private equity firm, Providence, which may have teamed up with either one of two trade buyers, US newspaper group Gannett and Johnston Press.

According to DMGT, the bids reflected the recent downturn in trading in the regional newspaper sector caused by the weakening of the wider UK economy, and came in below the long-term value of the business.

In calculating that value and deciding to keep Northcliffe, DMGT has factored in further cost reductions across the 110-strong portfolio of daily and weekly newspapers such as the Nottingham Evening Post and Cornish Guardian.

It said that the reductions, which come on top of the Aim Higher programme aimed at achieving cost savings of £30m, were identified as part of the same strategic review process that looked at a sale of Northcliffe.

However, it also alluded to newly identified revenue opportunities and declared its confidence in Northcliffe's prospects had risen.

DMGT said: "Consequently, the board has decided to retain Northcliffe. It firmly believes that Northcliffe has valuable long-term franchises, which will continue to play a vital role in their local communities."

The decision, taking the UK's third-largest regional newspaper business off the table, averts the expected consolidation in the market. Gannett-owned Newsquest and Johnston Press were expected to pick up most Northcliffe titles, with competition rules allowing other publishers such as market leader Trinity Mirror to come in for titles in areas where those groups were too dominant.

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