Times report on Express merger

Hold the front page: Desmond eyes 

sale of Express newspapers

January 11 2017, 12:01am, 

The Times

Richard Desmond and his wife Joy are prominent on the London social scene

DAVE BENETT/GETTY IMAGES

Richard Desmond is in talks that could lead to the sale of his publishing business after 16 years of ownership, during which he is understood to have received close to £158 million in dividends and rent.

The proprietor of the Express and Daily Star national newspaper titles is at the centre of a plan led by David Montgomery, the former News of the World and Daily Mirror editor, to create a new media group seeded by some of Mr Desmond’s media assets. If a deal goes ahead, Trinity Mirror, publisher of the Daily Mirror, also could take a minority stake in the new media entity.

News of the possible joint venture between some of the biggest names in the British media industry comes nearly two years after talks between Trinity Mirror and Mr Desmond’s Northern & Shell group ended acrimoniously.

Trinity Mirror said in a stock exchange announcement yesterday that it was in “early stage” discussions about taking a stake in the new company that would “comprise certain of Northern & Shell’s assets”, and it added: “No offer has been made and there is no certainty that any agreement will be reached.”

It is not clear yet which of Mr Desmond’s assets may be up for sale, but there is speculation that it could include the Express and Daily Star titles, as well as OK!magazine. The media mogul bought Express Newspapers, a subsidiary of the Northern & Shell group, for £125 million in 2000 and according to an analysis of the company’s accounts it has paid out £70.3 million in dividends since then. The last dividend payment in 2009 was £13 million. Mr Desmond is the controlling shareholder of the group.

Separately, Express Newspapers has paid £87.3 million in combined annual rent since 2004 to occupy a property owned by Mr Desmond on the north bank of the Thames. Express Newspapers has also paid £163.8 million in directors’ emoluments and pension contributions since the first full year of Mr Desmond’s ownership.

Mr Desmond could not be reached for comment last night. It was unclear how much he has invested over the years. More than £367 million has been paid in “fixed asset investments” since 2008, the accounts state.

The tycoon has been shrinking his media business in recent years, selling Channel 5 to Viacom, which owns MTV, for £463 million in 2014. He has also sold his adult television business, as well as his adult magazine titles including Asian Babes and Big Ones for about £24 million.

Market experts said that in setting up a new venture Mr Montgomery could follow the template he established when he created the Local World media group through the 2012 merger of Northcliffe Media, Daily Mail and General Trust’s local news group, and Iliffe News & Media. Trinity Mirror owned a 20 per cent minority share in Local World before taking full control in a £187.4 million deal in 2015.

Costly promises 
The shaky state of the staff pension schemes backed by Trinity Mirror could make a deal with Richard Desmond harder to consummate (Patrick Hosking writes).

The Daily Mirror publisher has made £1.8 billion of pension promises to 18,000 present and former staff in five different pension schemes and at present there isn’t enough money in the kitty. The shortfall varies, but it was £426 million in June. Any deal that materially diminishes the ability of the company to meet those promises could be opposed by the trustees and even blocked by The Pensions Regulator.

Taking on more debt to finance a deal, or handing over assets into a joint venture company, might be considered as weakening Trinity Mirror’s covenant, its perceived financial strength. However, if the deal was seen as potentially positive for the revenues and profits of the company, it might be considered as strengthening the covenant, in particular the ability of Trinity Mirror to honour plans to make repair payments to the pension schemes over the next ten years. If a deal involved an equity capital-raising by the company, that might also be seen as positive.

Trustees of the two Express Newspapers pension schemes are also likely to scrutinise any deal and could oppose it if they think it might reduce the ability of that group to pay promised pensions. However, the combined deficit at £21.6 million is relatively small compared with both the profits the company makes and the overall liabilities.

Frank Field, chairman of the work and pensions committee, criticised Trinity Mirror last week for using £10 million in cash to finance a share buyback when the schemes were in such poor repair. The company argued the sum was small beside the £41 million it earmarked for the pension funds last year.


© 2005-2017 Alastair McIntyre