Trinity backs pounds 2.3bn Mirror merger

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The Independent Online
A pounds 2.3BN MERGER between Trinity, the regional newspaper publisher, and Mirror Group to create Europe's biggest newspaper publishing company will be unveiled in the coming days, sources close to both companies said last night.

A Trinity board meeting yesterday afternoon is understood to have approved the deal, which will be structured as a mixed offer of cash and Trinity shares for the national and regional newspaper publisher.

Doubts about whether Trinity would proceed with an offer increased after Stephen Byers, the Secretary of State for Trade and Industry, ruled on Friday that it would be required to sell The Belfast Telegraph.

That provoked a brief conundrum for the Chester-based publisher, led by Philip Graf. The Belfast Telegraph is its most profitable title, contributing an estimated pounds 20m in annual operating profit - about one-fourth of Trinity's earnings. "Having to sell a very attractive asset for lots of money isn't the worst possible outcome," said a source. "This is a strategic and financial [merger], which is not merely opportunistic."

Since the weekend, several buyers have emerged for The Belfast Telegraph, including Independent News & Media, publishers of The Independent. Analysts have valued the title at upwards of pounds 150m. Trinity's apparent desire not to be deflected by the Byers ruling is likely to mean other potential bidders, including Regional Independent Media (RIM) and David Montgomery, the former Mirror chief executive, will have difficulty in launching an effective counter-bid. RIM has received clearance from the DTI to bid for Mirror Group, while Mr Montgomery has been organising venture capital financing.

Trinity's bid will give Mirror Group an enterprise value of about pounds 1.5bn. Trinity's enterprise value, post-divestment of the Belfast newspaper, would be about pounds 800m. Combined annual sales of the two groups would be about pounds 1bn. Operating profit would be near pounds 200m.

The logic of the link-up is threefold. First, it would become Britain's largest regional newspaper publisher with around 17 per cent of the market. It would be well placed to expand further as consolidation in the sector gains momentum.

Second, the relative invulnerability of regional titles to outside competition provides a healthy cash flow stream to buttress the Mirror in the more volatile national newspaper market. Third, the expanded financial capacity of the merged group would allow it eventually to expand overseas.