Trinity sells Racing Post, pulls other sales

LONDON Mon Oct 1, 2007 1:49pm BST

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LONDON (Reuters) - Trinity Mirror (TNI.L) said on Monday it had agreed to sell its sports division, but decided to keep its central and southeast England newspaper titles because it wasn't happy with the prices they attracted.

Trinity Mirror, owner of the Daily Mirror, said it was selling the Racing Post newspaper to FL Partners, an Irish investment vehicle, for 170 million pounds.

The company unveiled its plan to sell the divisions in December following a strategy review and said the process would be completed by the end of the third quarter.

Trinity Mirror's Chief Executive Sly Bailey said she expected to maintain the group's margins and improve cost savings following the company's decision to keep the newspapers.

"At the first half we had 20.8 percent group (operating) margins on flat revenue. Going forward, we still see ourselves being around 20 percent," Bailey told Reuters in an interview.

Shares in Trinity Mirror slipped in early trading, but were up 0.5 percent at 414 pence at 1220 GMT.

"The market has impacted on our ability to sell. We have always said we would not sell at any price," Bailey said, adding she had been in regular talks with shareholders, who did not want the assets sold cheaply.

The Racing Post's cash sale price was on a multiple of 3.4 times 2006 revenues and 11.2 times 2006 operating profit.

Trinity Mirror said its overall disposal programme would raise 263 million pounds from the sale of seven businesses in London and the South East and the Sports Division.

UBS analysts said Trinity Mirror could end up returning more than 200 million pounds, which is better than anticipated, given Trinity Mirror has confirmed it will not pay an automatic 50 million pounds for the pension deficit, and an early repayment on its private placement debt will not be triggered.

Analysts had initially expected gross proceeds ranging from 600 million to 650 million pounds, but Trinity Mirror said in August this would be nearer 450 million pounds.

VALUATIONS QUESTIONED

Trinity Mirror said its full-year performance would be in line with expectations, reiterating comments made in August.

The announcement marks the second time in recent years that a major sale of UK regional newspaper assets has been called off, after the Daily Mail & General Trust DMGO.L decided to keep its Northcliffe division in 2006.

"The two decisions put a question mark over how much buyers are prepared to pay for what were previously seen as 'must-have' assets; the key change has been the (potential) impact of the Internet on the regional newspapers' business models," said UBS.

Bailey said she was confident about Trinity Mirror's prospects given healthy levels of interest from advertisers. She said retail advertising was "very buoyant", but the company was cautious on how the ad market would perform over the year.

"The ad cycle is turning. Many commentators have overcalled the impact of structural change and have undercalled cyclical change. We believe our results and ad revenues will prove that this year," she added.

Alan Byrne, the Racing Post's new chief executive and editor-in-chief, told Irish public broadcaster RTE Radio that FL Group had bought the paper for a good price.

"We have outmanoeuvred a number of other interested parties. There was plenty of competition for it," he said, adding that there were opportunities to grow the paper internationally.

The Racing Post will face new competition in Britain with the launch of Racing Ahead Weekend on October 20.

The new weekly is aiming for sales of between 20,000 and 30,000 and will sell for slightly less than the Racing Post.

Anglo-Irish Bank provided debt finance for the FL Partners deal. Rothschild acted as adviser for Trinity Mirror.

(Additional reporting by Mark Potter and Kate Holton)

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