DMGT seeks private equity help in bid for Telegraph

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The Independent Online

Daily Mail & General Trust is negotiating a deal with venture capital players to help finance its bid for The Daily Telegraph in return for an equity stake in the Telegraph business, according to industry sources yesterday.

Daily Mail & General Trust is negotiating a deal with venture capital players to help finance its bid for The Daily Telegraph in return for an equity stake in the Telegraph business, according to industry sources yesterday.

It is believed that the three bidders still in the race - DMGT, 3i and the Barclay brothers - have until early next week to put in revised offers for the Telegraph titles. One report suggested the bidding had reached as high as £700m.

A deal to bid jointly with a private equity partner would allow DMGT to buy the Telegraph without having to issue equity or taking on a level of debt that would hit its credit rating. It would also remove the need to make disposals, such as DMGT's 29.9 per cent stake in GWR, the radio group.

Previously, it had been thought that DMGT was talking to private equity groups to provide it with an "insurance policy" in case its bid was successful but blocked by the competition authorities. Under this scenario, it would have offloaded the Telegraph titles to private equity at an agreed price.

DMGT is in talks with Apax Partners and Candover, which are in an alliance, and it is believed to be talking to at least one other private equity player, possibly CVC Capital Partners. No firm deal has been agreed, however.

Hollinger International's UK titles - The Daily Telegraph, The Sunday Telegraph and The Spectator magazine were put up for sale in November.

The City has questioned how DMGT would fund any bid for the Telegraph. The company has not issued equity since 1931 and the Rothermere family, which has a controlling interest in the company, is against its stake being diluted.

Although DMGT could finance the acquisition through debt, the company has been clear that it would not do anything that would hurt the rating of its bonds.

Instead, DMGT is offering finance groups equity in the Telegraph titles, which would be ring-fenced as a separate business from the rest of DMGT. Not owning the Telegraph outright may also help DMGT circumvent the formidable regulatory hurdles that it faces.

The deal may be structured to allow DMGT to buy out its venture capital partners at a later stage.

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