The KM Group has today scrapped its bid to buy a series of rival newspapers in Kent after it was referred to competition watchdogs.
The family-owned publisher had agreed a deal with Northcliffe Media to buy seven titles in its Kent Regional News and Media series.
But the deal collapsed this afternoon after the Office of Fair Trading referred the proposed acquisition to a full Competition Commission inquiry amid concerns it could create a “local monopoly.”
The KM Group had made it clear, since before it embarked on the regulatory process, that if this was the outcome, it would withdraw its bid.
Titles which had been affected by the proposed acquisition include the Medway News, East Kent Gazette, Herne Bay and Whitstable Times, Isle of Thanet Gazette, Thanet Times, Folkestone Herald and Dover Express.
The decision, the first since the government amended its guidance on media mergers, could have far-reaching implications for any future ‘consolidation’ of the local press industry.
Northcliffe managing director Steve Auckland said: “This makes a mockery of politicians expressing their desire to reduce red tape in business and allow consolidation in the regional press. We are not talking about a Google or a Microsoft here.
“The OFT has to operate within a regulatory system that is not designed to cope with small local newspaper businesses that have no prospect of funding a Competition Commission review and are thus denied the opportunity to consolidate.”
KM Group chairman Geraldine Allinson said: “We have invested a huge amount of time on this project over the last few months.
“The costs and time required for a full Competition Commission review would be completely unreasonable for a business of our size and for a deal of this scale.
“The acquisition would have been a good opportunity for our business.
“However, we have a long list of other developments already in process and we intend to continue to build on our unique blend of multimedia services for the people of Kent.”
In a statement, the OFT said: “These companies publish the only local weekly newspapers in seven local areas in East Kent.
“The OFT’s investigation concluded that the monopoly of local newspapers that would result in these areas risks costlier advertising for businesses and higher cover prices for readers.
“During its investigation, the OFT consulted with advertisers and readers to find out whether other regional or online newspapers, websites or magazines would be able to curtail these risks
“The evidence was clear that local weekly newspapers remain a very important means for advertisers to reach local audiences and for readers to obtain local news, despite acknowledging that these media provide some competition.”
Amelia Fletcher, OFT chief economist added: “Local newspapers face significant challenges, including falling readership and increased competition from other media, most notably, the internet.
“However, this merger would create a monopoly in local weekly newspapers in several local areas across East Kent.
“UK merger law requires the OFT to be cautious in its “first phase” review of mergers. We require compelling evidence to dismiss concerns that the combination of such close competitors as these might result in substantially higher prices or less choice for advertisers and readers.
“The evidence in this case did not permit us to clear this transaction; therefore we think it is appropriate that the merger is referred to the Competition Commission for a more detailed “second phase” review.'”
Commenting on the review process, the KM group’s former managing director Graham Mead, said: “We understand this is the first time the OFT has reviewed a case since the change in guidance.
“While the teams at the OFT and Ofcom were positive and supportive, almost without exception, there were some painful moments.
“From a personal perspective, it feels that the process is set up for large, corporate deals, not small transactions involving businesses of our size.
“The time and effort required appeared to be completely disproportionate to the transaction involved.
“Also, while we fully appreciate that the OFT team have to work to a strict framework, I don’t think that framework is at all relevant to the current state of our industry.
“Nor does it in any way reflect the broader government view on helping UK business by removing hurdles and giving it an opportunity to grow.”
Richard Karn, managing director of Northcliffe Media’s South East businesses said: “The last twelve weeks has been a period of great uncertainty for staff who have responded magnificently.
“We look forward to being able to return our focus entirely to the challenge of growing our business, by meeting the needs of our many valued advertising customers and business partners across Kent.”
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As a reporter for one of the Northcliffe-owned titles that had (?) been up for sale I’d like to say a few words. Firstly, despite knowing that our owners were happy to get rid of us and ungracious in defeat, everyone has been amazingly disciplined, got on with providing some cracking papers despite very limited resources and been resolute in the face of constant announcements from KM lawyers that: “The OFT is set to make a decision tomorrow.. Oh, actually it’s not, maybe next week”. So here we all are on our puny salaries, kicking arse across the county with pride and delighted to continue if Northcliffe don’t bury us in pique at the failed deal. Thanks to Richard Karn for his kind words about staff and efforts to keep us all informed every step of the way. As for the KM? Bad luck. #EpicTakeoverFail
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This same thing ( more or less) happened a few years ago when a bid for the Northcliffe Group was turned down by the board!
The reason was that the offer was not strong enough – lets say that I think that decision was regretted very quickly.
Anyway straight after – you guessed it – a whole series of “restructuring” was instigated!
Tin hats on again I’m afraid.
Good luck and I hope that fortune smiles on all of you guys.
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Absolutely hilarious to see the KM take the moral high ground following yesterday’s announcement.
Mind you, as self-appointed holier than holy guardians of public morals they’ve always been rather good at that.
Let’s forget all this talk of ‘consolidation’, and get the facts straight.
The KM group, like most local newspaper groups, are in a spot of bother. They came up with the bright idea that the way of getting out of that spot of bother was by buying up their only serious rivals in the potentially lucrative east Kent area.
The KM would no doubt have closed down many newspapers if this deal had gone through and are on record as confirming that redundancies would have followed. That’s business, of course. It stinks, naturally, but it’s business. I understand that.
But without doubt the KM would have had a ‘monopoly’ because, as we all know, poor old Kos look dead in the water and hardly constitute real competition. So from that point of view the OFT were spot on in their verdict.
I am also aware that a year or two down the line – possibly sooner -the OFT’s decision might well prove to be the wrong one. But for now thousands of Kent newspaper buyers still have a choice, a choice that the KM would have denied them.
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I’m not sure why this is being viewed as a massive victory by Northcliffe staff. Potentially you still face closed papers and redundancies – this was in essence a lifeline as far as I’m concerned. Unpopular perhaps but hey better the devil you know than the devil you don’t know.
In my experience the KM aren’t in the habit of asset stripping and its ludicrous to suggest they would buy historic titles only to shut them down.
Someone buying from outside the county won’t give a stuff how long these papers have been in the market place or how loyal the readership is. It would just be a case of picking through the bones for whatever meat’s left.
This isn’t a victory. This is a set back for the local newspaper industry.
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Hmmm….KM take over Folkestone Herald and Dover Express and it not being bad – of course it is bad competition wise. There is no one else there – so of course a local monopoly is being created.
Does it matter? Well – when I worked for the Herald back in the eighties it was a proper newspaper with reasonable staffing and cracking stories.
I assume it still is – cos circulation is well up on my day – congrats to everyone who has worked hard to do that. So would KM allow that to continue or would they embark on cost cutting leaving a skeleton staff to cover <Folkestone/Dover whilst all subbing and editorial decisions devolve to KM HQ?
I suspect it would – so OFT is probably right from an editorial point of view. And the OFT is definitely right from an advertising point of view – local businesses would have to pay KM whatever they asked for adverts with no competition. I have nothing against KM- they have always struck me as being a good group to work for – but Kent needs a bit of competition to keep everyone honest
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Dilip. Folkestone Herald has a good editor in Simon Finlay, but a skeleton reporting staff. The reason circulation is well up on your day is because it’s a hybrid. Declines in paid-for sale are simply off-set by giving away a load of copies for free. It’s got a wrap every week and paginations have shrunk. Not a great argument to be honest.
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I beg your pardon, KM staffer number 2, but a “skeleton reporting staff”? As a journalist, I’d think you”d have checked your facts… have you been to the Herald office recently? And I think you’ll find there isn’t a wrap every week. The reason circulation is up is because it’s a good paper, end of story.
And KM staffer number 1, it would have been a very sad day for the newspaper industry if it had gone ahead because readers would have had no choice.
Kent Hack and Digby – spot on!
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Get real KM staffers. If this had gone ahead papers would definitely have been closed by the KM, they confirmed as much to the OFT.
Redundancies at KRN? Possibly down the line.
At KM? Definitely down the line, I’m afraid.
KM are paying the price for being so up their own collective backside and being so superior for so long.
Time to wake up and smell the coffee…and possibly move into PR.
As Digby rightly said, the KM would have restricted choice and had a monopoly. That would have been deeply depressing.
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I think we need some more stories about out-of-date-pasties and public loo lightbulbs being left on
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Sid Bonkers, looks like your predictions were wrong… Northcliffe’s axing two titles and 35 jobs before Christmas.
http://htfpnew.adaptive.co.uk/2011/news/northcliffe-to-axe-two-kent-weeklies-in-wake-of-failed-deal/
This is sad news for local journalism all round. The pool of unemployed journalists grows as the pot of media jobs in Kent shrinks yet further….enough of the arguing “hacks” and “hackettes”. I think it’s fair to say we’re all in the same boat… and sadly, for some of us it’s time to grab a life ring…
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