Regional publisher Johnston Press has today confirmed it is in talks to buy national newspaper the i for £24m.
The company, which recently announced it was seeking to sell some of its 200-plus regional titles, is in “late stage discussions” over a deal to purchase the cut-price stablemate of the Independent and Independent on Sunday.
The newspaper, launched in 2010, retails for 40p on weekdays and sells around 275,000 copies a day.
JP says the deal would make it the UK’s fourth largest print publisher and would be “immediately earnings enhancing.”
According to the publisher, the deal would improve its ability to gain a greater share of the national advertising market as well as enabling it to benefit from the i’s circulation revenues.
It said the i, currently owned by Evgeny Lebedev, returned an operating profit of £5.2m in the year to September 2015.
However at a time when JP is seeking large-scale job cuts across its regional titles, the spending of £24m on a new acquisition is bound to raise questions.
According to its most recent trading update, JP’s net debt still stands at £184.6m, much of it dating back to a previous series of acquisitions in the early 2000s.
The proposed deal also leaves serious question marks against the future of The Independent and the Independent on Sunday, both of which are believed to be loss-making and dependent on the i to stay afloat.
The i has helped Mr Lebedev turn around the fortunes of the Independent stable which was losing £20m a year at the time he bought it in 2010.
News of the talks was confirmed in a statement issued to the Stock Exchange this morning, headed “Response to media speculation.”
It read: “The Board of Johnston Press plc (the “Company”) notes the recent media speculation and confirms that it is in late stage discussions with Independent Print Limited (“IPL”) for the potential acquisition of the business and certain assets of the i.
“There can be no certainty that the discussions between the Company and IPL will lead to any definitive agreement concerning the possible acquisition or as to the final terms of any such agreement. Completion of the acquisition would be subject to the approval of shareholders of the Company.
“The consideration for the proposed acquisition is likely to be £24 million, to be provided from the Group’s existing cash resources. In the year ended 30 September 2015, the i had unaudited carve-out operating profit of £5.2 million.
“The Board of the Company believes that, if consummated, the acquisition would provide the following key benefits:
· Greater reach: The combination would create the UK’s fourth largest print publisher with over 600,000 paid copies a day
· Increased scale: Greater reach would improve the ability to gain a greater share of the national advertising market
· Growing revenues: i has growing circulation revenues, and new opportunities arise from: a proposed digital product; new geographic markets; and from potential cross-selling of i’s advertiser base and vice-versa
· Accelerated digital transformation through: leveraging Johnston Press’ digital expertise to fully realise the i brand across digital platforms; the extensive Johnston Press network enables cross-promotion to grow audiences at minimal cost; it is expected that the regionally-oriented digital display network 1XL will be enhanced by the addition of a national brand.
“It is also expected that the acquisition would be cash generative and immediately earnings enhancing. A further announcement will be made when appropriate.”
Steve Auckland, chief executive of Mr Lebedev’s ESI Media added: “I can confirm that we are in discussion with Johnston Press regarding the sale of i newspaper.
“At this stage no decision has been made and we realise the uncertainty that this news will cause our employees and customers. Johnston Press are bound by strict PLC guidelines so unfortunately we can make no further comment at this time.
“ESI Media remains committed to our brands, building on our fast growing global footprint, whilst cementing our place as the most important destination for audiences in the capital.”
Writing on a Scottish business website, John claimed the group had been “touting around” the Edinburgh-based title but there had so far been “no takers.”
A spokesperson for the group said it would not comment directly on the claims or any other issue relating to its portfolio plans.
Johnston Press bought The Scotsman from the Barclay brothers for £160m in 2005.