Media regulator Ofcom warned competition watchdogs not to block the abortive merger between the KM Group and rival Northcliffe titles in Kent, saying it might put both of them out of business.
The KM Group’s bid to buy the seven Kent Regional News and Media titles collapsed last month after the Office of Fair Trading referred the proposed deal to a full Competition Commission inquiry.
However it has now emerged that in a local media assessment carried out prior to the decision, Ofcom warned that blocking the deal could lead to both KMG and KRNM ceasing to operate altogether.
The revelation is bound to fuel the mounting criticism of the OFT decision which some have argued flew in the face of government claims to be helping the local newspaper industry.
The Ofcom assessment, which can be read in full here, was carried out in September but has only just come to light.
It states: “If advertising revenues, circulation figures and profits continue to fall at their current rates, then absent the merger, KMG and KRNM may in the future be forced to close or merge titles or perhaps even cease operating altogether, thereby resulting in a worse outcome for consumers.
“The evidence available to us suggests that the target business and the regional newspaper business of KMG will struggle to achieve profitability in their current form, which might lead them to respond by closing newspaper titles or reducing quality (or both).
“In light of this, a merger may provide the opportunity to rationalise costs, maintain quality and investment, and provide a sounder commercial base from which to address long-term structural change, for example by expanding the availability of online and other digital local services.”
Titles which had been affected by the proposed acquisition included the Medway News, East Kent Gazette, Herne Bay and Whitstable Times, Isle of Thanet Gazette, Thanet Times, Folkestone Herald and Dover Express.
The KM Group pulled out of the deal saying the costs of a full Competition Commission review – estimated at £750,000 – would be unreasonable for a business of its size.
KM Group editorial director Ian Carter said today: “It has always been our contention that this deal would have been the best way to secure the long-term future of quality journalism in Kent. It would have represented the best outcome for readers, advertisers and for staff working at both groups.
“The fact the OFT received such strong advice from Ofcom about the changes in the markets and increasing competition from other media makes the decision to refer the proposed acquisition to the Competition Commission even more frustrating.
“We remain extremely disappointed with the OFT’s decision, which goes against repeated Government promises to help the local newspaper industry.
“However, we still have a fantastic portfolio of paid and free newspapers, market-leading online services and radio stations and despite the challenging market conditions will continue to develop our multimedia strategy and invest in our products and people to produce the best quality journalism in the county.”