Outlook: Mirror mirror on the wall who's the fairest bidder of all?

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The Independent Online
ACHTUNG! Surrender. For you Monty ze game is over. Well, perhaps not quite yet. But the chief executive of the Mirror Group knows the business is in play and, couldn't you just guess, it's the Germans who are favourites to take David Montgomery's ball away. Axel Springer's after-hours announcement on Friday that it was considering a bid has already brought one other would-be suitor out of the woodwork. We now know that Trinity, the country's biggest regional newspaper group, was holding exploratory merger talks with the Mirror until the Germans broke up the party.

The other ususal suspects -the Barclay brothers and Mohamed Al Fayed - have yet to break cover. But this being an everyday story of newspaper folk it can surely only be a matter of time.

The inspiration for last week's spurt of stock market speculation linking the Mirror to some corporate action can only be guessed at. But it has had a pleasing effect on all those executive share options, while simultaneously raising the price that any eventual bidder will have to pay for the business.

That the Mirror and Mr Montgomery want to do a deal appears pretty much accepted all round. But what kind of story would a new owner be buying into? The group's flagship tabloid, the Mirror, has been losing the war of the "red tops" since the start of the decade. More recently, the share price has been heading in the same direction, underperforming the market by a third until Springer popped up. The foray into television has been fun but so far fruitless and even with its most recent acquisition, Midland Independent Newspapers, the City is suspicious of what Mirror Group can do for an encore once the oligatory round of ruthless cost-cutting has worked through to the bottom line.

Springer's riposte is that it is a builder of businesses. Just look at what it has done for the circulation of Bild, one of the few tabloid newspapers anywhere in Europe that is putting on readers. But Bild already has an extraordinarily dominant franchise. In comparison with the cut-throat arena Springer would be entering in the UK, the German tabloid newspaper market looks like a teddy bears' picnic. What's more, in the absence of any obvious duplication or scope for savings in purchasing, there would be precious little scope for Springer to dress a deal up as a cost-cutting exercise itself.

All the while, the Mirror share price continues to run ahead. At 280p, a 40 per cent premium to its price before bid speculation began, the Mirror would cost pounds 1.4bn - two-and-a-half times sales and a fancy 10 times earnings before tax, interest, depreciation and amortisation. Mr Montgomery is said to be looking for something nearer 300p - a price that Mirror Group shareholders have never even glimpsed during his six years at the helm.

Rational men can do odd things when the smell of newsprint gets into the nostrils. Gus Fischer, Springer's chief executive, should be oblivious to that since he has been in the newspaper business long enough, including a spell with News International where he and Mr Montgomery got to know one another. But if the Germans are going to bid, they need to get their gameplan together quickly.

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