Trinity Mirror Buying GMG Regional Media For £44.8 Million

Trinity Mirror (LSE: TNI) still sees value in local newspapers, even if Guardian Media Group doesn’t. It’s buying GMG Regional Media – with its 32 newspapers and websites – for £44.8 million ($70 million), in a deal that had been expected and shows the very different strategies of the two companies

The cash price is actually just £7.4 million, but Trinity is paying £37.4 million to get out of GMG Regional Media’s existing long-term print contract (after all, it already has its own presses). The announcement says the group made a zero operating profit for the 2009 full year and has gross assets of £8.7 million.

The sale includes GMG Regional Media’s MEN Media (including the Manchester Evening News, 22 weeklies, a metropolitan magazine and a web network claiming 1.55 million monthly uniques) and S&B Media in Surrey and Berkshire (publishing titles including the Surrey Advertiser and Reading Post). But Manchester TV channel Channel M and two local papers in Woking are not part of the deal, prompting likely speculation they may be shut or a buyer sought.

Trinity CEO Sly Bailey, in the release, says it’s a “perfect strategic fit” and “a further step towards our strategic goal of creating a multi-media business of real scale“. But I think this is a better deal for Guardian Media Group, which has needed to do something to safeguard its core Guardian business. Guardian News & Media losses grew 40 percent to £36.8 million (now $57.5 million) in 2008/09.

GMG CEO Carolyn McCall, in the announcement: “We believe Trinity Mirror, as the UK’s biggest regional publisher, is best placed to develop this business.” But exactly how Trinity can make the operation successful where GMG could not is not clear – Trinity’s websites delight few visitors, and Bailey – who speaks of restoring the importance of direct traffic to news brands, rather than finding a place in the search ecosystem – seems of the belief that newspapers’ current malaise is cyclical.

The irony: whilst running away from the local newspaper business by off-loading GMG Regional Media, GMG’s core Guardian business is embracing local by setting up three experimental metropolitan blogs – in Cardiff, Edinburgh and Leeds – with more possibly to follow. That may stick in the craw of GMG Regional Media’s staff in Manchester, the city that was once the heartland for a paper that now has ambitions of spreading liberal journalism globally.

GMG Regional Media has been suffering the same perfect storm as Trinity Mirror’s own titles – migration of advertising revenue and structural media change, compounded by the downturn….

— Annual profit crashed from £14.3 million in 2007/08 to £500,000 in 2008/09, on 21.5 percent worse revenue of £94.5 million.
— Property classifieds ad sales fell by 46 percent and job ads by 34 percent.

The unit cut about 300 jobs early in 2009 at iMEN Media division and S&B Media.

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