THEord Rothermere has won its battle to pull the family business out of the public purse after 90 years. The lean wallet it is about to privatize marks a return for the Daily Mail editor to its journalistic roots, but it also raises the question of whether, in a quest for scale, a future tie-up with the Telegraph could be on the cards.
For much of this century, Daily Mail & General Trust, which includes Metro and me alongside Mail Headlines, embarked on a very successful strategy to diversify and move away from reliance on its publishing operations as the digital switchover began to hit the newspaper industry.
In 2009, Peter Williams, then CFO of DMGT, scorned the sale of the loss-making Evening Standard, saying: “We are much more than a newspaper company… to be honest, we don’t see this as an event. . “This was still the case last year, when DMGT’s £ 1.2bn revenue was split evenly between its mainstream media business and its business-to-business portfolio.
However, assuming Rothermere can muster shareholder support to carry out his plan, the new, slimmer DMGT will have revenue of £ 781million, with the publication reaffirming its dominance to account for around three-quarters of revenue, at a market value including debt of £ 850 million.
Since taking over as Managing Director in 2016, Paul Zwillenberg, a partner of the Boston Consulting Group with a close and long-standing relationship with Rothermere, has generated more than £ 3.6bn from divesting holdings and businesses including Zoopla, The Hobsons Education Company, Genscape Energy Data Mining. and, more recently, the RMS insurance risk business and Cazoo’s listing.
“DMGT is at an inflection point,” the company’s board told investors, most of whom, he admitted, would not want to stay on board a low-growth, focused operation. on the media. “Significant acquisitions of media companies would change the profile of the group and could be incompatible with the investment objectives of a significant proportion of DMGT shareholders. “
However, Rothermere faces opposition to his plan: two of the top 10 shareholders – Majedie Asset Management and JO Hambro Capital Management, who combine control or advice over shares representing 10.2% of DMGT – argue that the takeover offer terribly undervalues assets. Rothermere is seeking the support of 90% of shareholders to bring the deal to fruition. However, he also has the option of changing the conditions so that only 50% approval is needed for delisting, those who do not wish to sell the offered shares in the private company.
The market remains difficult for publishers. DMGT’s business outlook shared with investors revealed that contract costs for newsprint suppliers have reached levels not seen since 1996 and, as a result, job cuts are looming in its publishing business of 2 400 people.
“These have started to affect the profitability of the newspaper business in recent months,” the company said. “DMGT is currently exploring a number of options to mitigate the impact of these cost increases, including a review of the number of employees. “
The flagship of the portfolio remains the Mail banners – the Daily Mail, Mail on Sunday and MailOnline – and Rothermere has embarked on a radical restructuring of its management.
While the print edition of the Daily Mail last year supplanted The Sun as the UK’s top-selling newspaper, a headline Rupert Murdoch’s tabloid had held since 1978, Rothermere is focused on a digital future.
Last Monday, Richard Caccappolo, a New York-based American media executive who worked with MailOnline editor-in-chief Martin Clarke to make it one of the world’s largest news sites, was promoted to head the journal and editing operations.
Days later, Geordie Greig, who has edited the Daily Mail for three years since Dacre resigned, was abruptly ousted in a sideline saying those based on the digital side of DMGT’s media divide are in. rise. Greig has been replaced by Ted Verity, editor of the Mail on Sunday, who will oversee the two titles, paving the way for a merger or combination of resources to cut costs.
And finally, last month Paul Dacre stepped down as chairman and editor, ending 42 years with the company.
The pandemic has undermined sales and advertising revenue derived from print newspapers and accelerated the longer-term shift to digital consumption, and MailOnline’s revenue scale within Rothermere’s media portfolio has increased.
MailOnline and DailyMailTV, the TV show launched in 2017 to help publicize how the web works in the United States, achieved a turnover of £ 170million in the year ending late September. MailOnline is now about half the size of the Daily Mail and Mail on Sunday, whose revenue fell 2% to £ 348million. In pre-pandemic 2019, MailOnline was one-third the scale of its print partners.
In terms of advertising, the trajectory is clear. MailOnline ad revenue grew underlying 16%, while Mail headlines print ad revenue grew only 1%; digital advertising now accounts for 67% of total advertising in the combined mail business. Across the mainstream media portfolio, digital revenues grew 15% and account for 32% of all revenues, up from 28% in 2020.
Rothermere has focused on targeted acquisitions to continue to grow the scale needed to continue to compete, having purchased New Scientist magazine in a £ 70million deal in March, as well as newspaper i in a £ 49.6million deal two years ago.
According to some sources, DMGT has sketched a scenario of a minority stake in the Telegraph, which has refocused on digital in recent years and has more than 600,000 print and digital subscribers, as part of a consortium buyout. , when co-owner Sir Frederick Barclay raised the possibility of a sale two years ago.
“If DMGT attempted to buy the Telegraph, it would certainly trigger investigations into competition and media plurality, but that wouldn’t necessarily mean it would be blocked,” says Alice Pickthall, senior analyst at Enders Analysis. “With the long-term structural decline of the newspaper market, stalling a deal is not as clear as it used to be.”
The Mail and Telegraph combination would give Rothermere a 36% share of the national newspaper market, putting the company on a par with News UK, which owns The Sun and The Times, as the two main players. .
However, at this time, DMGT is not expected to announce a short-term transformational deal. The company told investors last week that it saw only “a few small-scale opportunities in media-related businesses.”
Suitors who have shown interest in the Telegraph have never seen the talks progress. But as the focus of Rothermere’s DMGT shrinks to the media and the scale becomes more and more important, such a combination could benefit both parties.
“I don’t see them looking to buy the Telegraph in the short term,” says Pickthall. “But strategically, in the medium term, given the market, I could see it happening.”