Bad blood in the North

Is the Scottish Media Group being forced to sell assets? Two rival papers said so. But, as Paul Kelbie finds, there's more to the story
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The Independent Online

When a potentially damaging story appears in one newspaper, it can often be denied as inaccurate or mistaken. But when the same report appears in two newspapers, denial usually becomes a little more tricky.

That is, of course, unless the two papers in question are owned by the same publisher, the story is about their most bitter rival, and the two reports were written by the same journalist. Yesterday, Scottish Media Group (SMG), which owns Scottish TV, Grampian and The Herald newspaper, was forced to deny reports that its chief executive, Andrew Flanagan, had ordered the break-up of the company and the sale of key assets in response to growing pressure from its bankers.

A company spokesman took the unusual step of categorically denying the possibility of the group being broken up, claiming the reports were merely an attempt to destabilise the company."The story that we plan to break up the business in any way is utter nonsense," he said.

Reports on the front pages of Scotland on Sunday and The Business, both owned by the Barclay brothers, claimed that Glasgow-based SMG was about to offer Virgin radio and its 29.5 per cent stake in Scottish Radio Holdings for sale. Both stories, written by Robert Bailhache, the city editor of The Business, claimed SMG would also offer Granada, an 18 per cent shareholder, an option to take over its Scottish and Grampian television franchises.

The move would, The Business said, result in SMG being forced "to abandon its ambitions to become a major British media group headquartered in Glasgow". The stories suggested it was "not clear" whether SMG intended to sell The Herald, Glasgow's Evening Times or the "loss-making" Sunday Herald.

While both newspapers quoted nobody by name and gave no indication of their source, staff at SMG were under no illusions about who they believed was behind the story. "It is no surprise that both these stories only appeared in Scotland on Sunday and The Business, both of which are run by Andrew Neil, who has never made any secret of his desire to acquire our newspapers," said an SMG executive. "He has said publicly in the past that The Scotsman and The Herald should merge and that he would be very willing to buy The Herald. I think you could safely say these stories are just wishful thinking on his part."

Although it is true that SMG's shares have come under pressure since the start of the year, after speculation that the company has suffered badly from the downturn in advertising spending, the company adamantly denies it has been told by bankers to restructure assets.

In November SMG brought in Deloitte & Touche to review its financial position and cut its debts, estimated to be about £390m. Since then there has been speculation among some analysts that the group, which also owns the cinema and outdoor advertising group Pearl & Dean and Ginger Media, founded by Chris Evans, will have to sell something to reduce borrowings.

Such speculation that Scotland's most powerful media group may have to relinquish its publishing assets would, it was claimed by SMG insiders yesterday, be welcome news to Neil. There has long been rivalry between The Scotsman and The Herald, which have been involved in a bloody circulation battle. Despite price cuts, costly redesigns and recruitment freezes the war of attrition between the two titles has failed to enable The Scotsman to claw back readers from its Glasgow-based rival. It cut its cover price just before a slump in advertising, and despite the appointment of its eighth editor in as many years the circulation continues to slide.

The Herald is now Scotland's best-selling broadsheet, with a circulation of 96,615, although this has dropped by 0.97 per cent in the past few months. That still compares favourably with The Scotsman's 80,223. Equally, the front-page story in The Business referred to SMG's "loss-making" Sunday Herald but made no mention of the fact that its circulation was growing at a much faster rate that its closest rival, Scotland on Sunday.

Yesterday, a spokesman for The Scotsman Publications denied that there was a vendetta against SMG or that they had any ulterior motive for running the story. "We are satisfied with the accuracy of our sources. There's much speculation about the future of SMG and it's our job to report that in the same way as any other major Scottish company that was facing a restructure.

"SMG is big media player in Scotland and The Scotsman is a newspaper. It is unlikely that the Herald newspapers are going to be looking at the same kind of story."