lord rothermere has won his battle to lift the family business from the glare of public markets after 90 years. The slimmed-down portfolio he’s about to take private marks a return for the editor of the Daily Mail to his journalistic roots, but also raises the prospect of whether, in a quest for scale, a future link to the telegraph might be in the cards.
for much of this century, daily mail & general trust, which includes metro and i along with mail titles, embarked on a highly successful strategy to diversify away from its publishing operation when the shift to digital began to affect the newspaper industry.
in 2009, peter williams, then dmgt’s chief financial officer, dismissed the sale of the loss-making evening standard, saying, “we’re much more than a newspaper company… to be honest, we don’t see this as a very big event.” This was true as recently as last year, when dmgt’s £1.2bn revenue was split evenly between its consumer media operation and its business-to-business portfolio.
however, assuming rothermere can muster shareholder support to carry out its plan, the new, smaller dmgt will have revenues of £781m, with the publication asserting its dominance to represent approximately three quarters of the proceeds, at market value including £850 million in debt.
Since his arrival as chief executive in 2016, paul zwillenberg, a partner at boston consulting group with a close and longstanding relationship with rothermere, has generated more than £3.6bn through the sale of holdings and businesses, including zoopla, the company of education hobsons, genscape energy of data operations and, more recently, insurance risk commercial rms and the dipping price.
“dmgt is at a tipping point,” the company’s board told investors, most of whom acknowledged they wouldn’t want to stay aboard a low-growth, media-focused operation. “significant acquisitions of media businesses would change the profile of the group and could be inconsistent with the investment objectives of a significant proportion of dmgt’s shareholders.”
However, rothermere faces opposition to his plan: two of the top 10 shareholders, majedie asset management and jo hambro capital management, which combines control or advice on shares representing 10.2% of dmgt , argue that the purchase offer woefully undervalues the assets . rothermere is seeking 90% shareholder support to push through the deal. however, you also have the option to change the terms so that only 50% approval is needed to exclude those who are unwilling to sell the shares offered in the private company.
The market continues to be a challenge for publishers. A dmgt business outlook shared with investors revealed that contract costs with newsprint suppliers have reached levels not seen since 1996 and, as a result, job cuts are looming at its 2,400-employee strong publishing operation.
“These have begun to affect the profitability of newspaper businesses 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 headcount.”
The gem of the portfolio remains the mail brands: daily mail, mail on sunday and mailonline, and rothermere has been busy with a radical restructuring of their management.
while the print edition of the daily mail last year supplanted the sun as the uk’s best-selling newspaper, a title rupert murdoch’s tabloid had held since 1978, rothermere is focusing on a digital future.
Last Monday, richard caccappolo, a new york-based american media executive who has worked with mailonline’s publisher martin clarke to build it into one of the world’s largest news sites, was promoted to head newspaper and publication.
days later, geordie greig, who has edited the daily mail for three years since dacre ceased operations, was abruptly fired in a sideline indicative that those based on the digital side of dmgt’s media division are rising. Greig has been replaced by Ted Verity, editor of the Sunday Mail, who will oversee both titles, paving the way for a cost-cutting merger or combination of resources.
and finally, last month, paul dacre stepped down as president and editor-in-chief, ending 42 years in the business.
The pandemic has hit sales and advertising revenue from print newspapers and hastened the long-term shift to digital consumption, and mailonline’s revenue scale within the rothermere media portfolio has grown.
mailonline and dailymailtv, the television show launched in 2017 to help raise awareness of the web operation in the US, earned £170m in revenue in the year to the end of September. mailonline is now about half the size of daily mail and Sunday mail, whose revenue fell 2% to £348m. in pre-pandemic 2019, mailonline was a third of the scale of its print peers.
On the advertising front, the trajectory is clear. mailonline ad revenue grew 16% underlying, while mail headline print ad revenue was up just 1%; digital advertising now accounts for 67% of total advertising across mail businesses combined. Across the entire consumer media portfolio, digital revenue increased 15% and represents 32% of all revenue, up from 28% in 2020.
rothermere has focused on specific acquisitions to further build the scale needed to remain competitive, having bought the magazine new scientist in a £70m deal in March, as well as the newspaper i in a £49m deal. £6m two years ago.
Sources say dmgt outlined a scenario to take a minority stake in Telegraph, which has refocused on digital in recent years and has more than 600,000 print and digital subscribers, as part of a takeover by of a consortium, when its co-owner, Sir Frederick Barclay, raised the possibility of a sale two years ago.
“If dmgt tried to buy the telegraph, it would definitely 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, whether a deal should be blocked is not as clear as it used to be.”
Combining the post and telegraph would give rothermere a 36% share of the national newspaper market, putting the business on a par with news uk, which owns sun and times, as the two biggest players.
However, for now, dmgt is not expected to announce a transformative deal any time soon. the company told investors last week that it only sees “some small-scale opportunities in media-related businesses.”
The suitors who expressed interest in the telegraph never saw the progress of the talks. but as rothermere’s dmgt’s focus narrows to the means, and scale becomes increasingly important, such a combination could benefit both parties.
“I can’t see them thinking of buying the telegraph any time soon,” says Pickthall. “But strategically, in the medium term, given the market, I could see it happen.”