Mirror presses Trinity for 300p-a-share offer

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The Independent Online
MIRROR GROUP is pressing Trinity, its preferred merger partner, for a bid above 300p per share, valuing the tabloid and regional newspaper publisher at pounds 1.65bn, people familiar with the matter said last night.

News of the rising price for a quick Mirror agreement to link with Trinity came as its ousted group chief executive David Montgomery hatched plans to buy the company.

Mr Montgomery is thought to be receiving financial backing from Kohlberg Kravis Roberts, the US investment bank. A spokeswoman for KKR in New York declined to comment.

Also in the bid frame is Regional Independent Media, a privately owned group financed by Candover Investment Trust.

The possibility of a three- way bidding contest is tipped to push a successful approach for Mirror to 300p or higher. It would represent a minimum 25 per cent premium to Trinity's earlier cash and shares bid, that values Mirror at about 242p compared with yesterday's close at 249.5p, up 3p.

That proposal would have seen shareholders receive 0.35 of a Trinity share for each Mirror share, plus 40p in cash. RIM earlier indicated it was prepared to offer 200p in cash per share.

Both proposals lapsed pending an investigation by the Competition Commission. That report has been submitted to the Department of Trade and Industry, which is expected to release its recommendations shortly.

The price of 300p plus that Trinity will have to offer to secure board and institutional shareholder agreement for a Mirror merger reflects three factors, say people familiar with the situation. First, cost savings of the merged group, originally estimated by Trinity at just pounds 10m per year, have been ratcheted upwards to over pounds 30m. Integrating the two groups' regional titles with Mirror's national titles is now seen as giving real savings on distribution and production costs.

Moreover, the 2 percentage point decline in interest rates over the past year to just above 5 per cent, enhances the value of Mirror's estimated pounds 70m per year free cashflow. It also boosts the degree of leverage available to the new company.

A third factor is Mirror's net pounds 150m gain from selling its Scottish Media stake and its former Holborn headquarters. The disposals are worth slightly more than 30p per share and would have been calculated over and above earlier bid prices.

Though Mr Montgomery is considered to have, at best, an outside chance of making a triumphal return to Canary Wharf, newspaper industry executives note that investment banks and venture capital funds, oozing with cash, are shaving margins to boost deal flow. This will also aid Trinity and RIM as they do their sums in pursuit of a successful Mirror Group takeover.

Should a Trinity-Mirror deal prevail, only Northern Ireland presents a possible competition problem since Trinity owns the Belfast Telegraph, while Mirror owns the Derry Journal and The Newsletter. In that event, The Newsletter, a traditionally staunch voice of Unionism, could offer Mr Montgomery areturn to the newspaper business in his native Ulster.

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