Mirror agrees to Trinity merger

MIRROR GROUP and Trinity unveiled an agreed pounds 2.4bn merger yesterday as potential rival bidders Regional Independent Media (RIM) and David Montgomery, former chief executive of the tabloid group, pondered their options.

It also emerged that at least one group, believed to be Northcliffe Newspapers, the regional newspaper arm of Daily Mail & General Trust, has proposed to swap British titles and cash in exchange for the Belfast Telegraph.

Trinity, which has offered a mixture of cash and stock worth about 270p for each Mirror share, is being forced by Stephen Byers, Secretary of State for Trade and Industry, to sell its four Belfast titles in order to maintain a balance of competition. Mr Byers found that the Irish News, a nationalist title, would have been threatened by the linkup of Trinity's commercially dominant Belfast operation with Mirror's national titles.

The meagre 5 per cent premium for Mirror shareholders was slightly below expectations, analysts said. But that didn't stop Phillips & Drew, Mirror's biggest shareholder, from irrevocably agreeing to sell its 14.7 per cent stake unless an offer pitched above 301p is tendered within 11 days.

Other major shareholders include Brinson Trust, Legal & General and Lazard Freres. "This is the beginning of a terrific opportunity for Trinity and Mirror," said Philip Graf, Trinity chief executive who will retain that position in the merged group. "This is the culmination of the strategic development of Trinity and Mirror."

But doubts about the financial logic of the deal saw Trinity stock ease 14.5p to 568.5p, while Mirror stock gained 5.5p to 260.5p. "Essentially Trinity are paying an element of take-over premium," said Anthony de Larrinaga, analyst with WestLB Panmure. "It's not a bad deal but Trinity are sharing more of the benefits of the deal with Mirror shareholders than their own."

Under the deal, Mirror Group shareholders will hold 51.6 per cent of the enlarged company's shares and Trinity shareholders 48.4 per cent. The merger terms are 0.325 of a new Trinity share and 82p in cash for every Mirror share.

The key jobs at the enlarged group are being more or less equally divided. Victor Blank, chairman of Mirror Group will retain that position, while John Allwood, chief executive of the tabloid publisher, will become deputy chief executive and finance director.

Michael Masters, finance director of Trinity will become managing director of Ireland, Scotland and regional newspapers. Roger Eastoe, Mirror Group managing director, will become managing director of national newspapers and the Racing Post.

Opinion is the City was split last night over whether a counter bid would emerge next week. Advisors close to both companies stressed the immediate and long-term benefits of a deal for both companies. The enlarged company would have had pro forma 1998 sales of pounds 1.03bn and would have generated operating profit of over pounds 235m once an estimated pounds 15m of post-merger savings are factored in. Group debt, prior to disposals, would be around pounds 800m giving Trinity Mirror substantial borrowing capacity to go on the acquisition trail.

Outlook, page 21