The rising prevalence of digital advertising has created a difficult environment for newspaper publishers in recent years. That is why Richard Desmond – who has used far more colourful language to describe the damage inflicted by a new era in advertising – has agreed to sell his Express portfolio of publications to Trinity Mirror (TNI) for £127m.
The cash and shares deal is the biggest shake up in the UK newspaper industry since the Barclay brothers bought the Daily Telegraph in 2004 and comes at a time when falling advertising revenues are biting into company financials. Trinity Mirror will book a 9 per cent drop in like-for-like revenues in the year to December 2017, although that was slightly ahead of consensus expectations. Meanwhile competitor Daily Mail and General Trust (DMGT) reported a 1 per cent decline in sales at its consumer business during the final quarter of 2017.
According to Mr Desmond and Simon Fox – chief executive of Trinity Mirror – combining the Express titles (which includes the Daily Express, Star and OK magazine) with Trinity Mirror’s own publications will create a larger platform that will be attractive to advertisers. Management also thinks the merger will make £20m of annual cost savings by 2020, thanks to printing and back office synergies. Trinity Mirror will pay for the deal via an initial cash payment of £42.7m, deferred cash payments of £59m to be paid between 2020 and 2023, and £20m-worth of new Trinity Mirror shares. The total value is roughly equal to what Mr Desmond paid for the titles 17 years and so – after adjusting for inflation – he has made a heavy loss on his investment. It will also make an up-front cash payment of £41.2m to the Northern & Shell pension schemes.
