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DMGT in Northcliffe talks

Daily Mail and General Trust (DMGT) is in talks surrounding the future of Northcliffe Media, its ailing local media division.
November 2, 2012

In response to growing media speculation, Daily Mail and General Trust (DMGT) has confirmed it is in talks surrounding the future of Northcliffe Media, its ailing local media division.

David Montgomery, a former Mirror Group chief executive, is reportedly behind a proposal that would see new company Local World take over the Northcliffe operation. As part of the plan, Yattendon, a media and property group, would transfer the regional newspaper titles of its Iliffe News & Media subsidiary into the new company in exchange for cash and equity.

According to reports, the proposed deal values Northcliffe at around £100m. DMGT and Yattendon would own nearly half of Local World, while Mr Montgomery would also get a stake. Mr Montgomery's plan is also said to have financial backing from various banks, including the Bank of Ireland, HSBC and Lloyds. Trinity Mirror is rumoured to be eyeing up a stake in Local World, too.

The value of Northcliffe Media, which runs 84 regional newspapers plus various local news and information outlets under the 'thisis' banner, has plummeted in recent years. DMGT reportedly rejected a £1.2bn offer for Northcliffe in 2005, but subsequent drastic falls in advertising and circulation revenue - caused by online competition - has hurt operating profits. The £17m operating profit that Northcliffe posted in its 2011 financial year ended November was 37 per cent lower than the previous year.

And the tough trading conditions haven't let up. During the nine months ended 1 July, Northcliffe Media suffered a 10 per cent year-on-year drop in advertising revenue. Underlying circulation revenue was up 2 per cent over the same period, helped by cover price increases, but not enough to stave off some sharp cost-cutting measures. Since the start of its 2012 financial year to September, DMGT has cut the Northcliffe Media workforce by 12 per cent to just over 2,200.