City: MGN returns

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The Independent Online
LET'S have a big hand, please, for Mirror Group Newspapers. After the better part of a year in suspension, during which time the group has made some of the most spectacular news of the decade, MGN's shares are back. They opened at about 50p last week, and the dealing was pretty intense. About 20 million shares traded on the first day. Much of this movement was down to disgruntled shareholders pulling out at the first opportunity. Were they right, or were the new buyers who were piling in?

Whichever way you look at it, MGN is still a bit of a punt. The pension fund problem has been straightened out, if not solved. There is a liability of nearly pounds 200m to be paid over 14 years. The group's net debt stands at pounds 400m. So far so good - these holes in its balance sheet are known. But there remains the little matter of a Department of Trade and Industry inquiry. What it will find, and what litigation will result, is anyone's guess. The question is whether this risk is balanced by the cheapness of the shares.

At 50p, it has to be attractive. This gives it a market capitalisation of pounds 200m and puts it on a multiple to cashflow of less than 2 times. It is also a real cash cow, if you compare it to other newspaper groups such as the Telegraph.

At that rate, sooner or later someone is going to buy MGN. Given the lingering funnies that may still lurk in the accounts, it would take a company with strong-nerved shareholders to take it on. A more likely buyer, perhaps, would be a group that did not need to worry about the opinions of shareholders: one like Bertelsmann, the German publishing company.

It may not quite be a case of fill your boots with MGN shares. But it's certainly worth a few slippers full.

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