LONDON, June 8 (Reuters Breakingviews) - There’s a profound similarity between selling a sports team and selling a newspaper. Both businesses appeal to deep-pocketed buyers seeking influence or prestige. That’s the only way to explain a possible 600 million pound ($748 million) price tag for the Britain’s Telegraph Media Group (TMG).
The company, which owns the Daily and Sunday Telegraph newspapers as well as the Spectator magazine, may be up for sale because its parent group has failed to repay about 1 billion pounds of debt owed to Lloyds Banking Group (LLOY.L). Britain’s biggest lender appointed AlixPartners as receivers to recover some value, which could involve auctioning off the influential right-of-centre titles.
The good news for Lloyds is that TMG, run by Nick Hugh, has recently been profitable and growing. Revenues rose 4% in the most recently reported financial year, which ended in January 2022. EBITDA hit 40 million pounds, up 5%, based on UK filings, while borrowings were minimal. The debt load behind the Lloyds spat sits at the parent company of the Barclay family, the group’s long-time owners. Sir Frederick Barclay and his late brother David bought the titles almost two decades ago.
Lloyds reckons the price tag could be as high as 600 million pounds, according to media reports. That’s hard to justify. Assume revenue kept rising at 4% last year, as it did in the previous one, and TMG would have had a top line of 255 million pounds in the financial year ending in January 2023. Listed peer Reach (RCH.L), owner of the Daily Mirror and other UK newspapers, trades at 0.4 times 2022 revenue. On that basis, TMG’s value including debt would be just over 100 million pounds. Granted, Reach is shrinking while the Telegraph’s digital subscription business offers the chance for continued growth.
Lloyds and AlixPartners will no doubt make a different valuation case. It helps that they have precedent in recent sales of well-known media brands. Japanese media group Nikkei bought the Financial Times in 2015 for 2.5 times the previous year’s revenue. Exor (EXOR.AS), the investment vehicle of Italy’s Agnelli clan, bought a stake in the Economist Group for 14 times trailing EBITDA, Breakingviews calculated. Both figures would imply a roughly 600 million pound enterprise value for TMG, assuming that the top line grew 4% last year and that the EBITDA margin held steady.
The upshot is that an influence-seeking billionaire, perhaps one seeking visibility in the Conservative Party, could find a way to justify the asking price – even if it seems a stretch on purely financial grounds.
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CONTEXT NEWS
Receivers chosen by Lloyds Banking Group could put the Telegraph Media Group up for sale after its Bermuda-based parent company B.UK failed to repay bank loans. B.UK’s receiver is AlixPartners.
An auction process for the Telegraph newspapers and the Spectator magazine could kick off within days and value the assets at about 600 million pounds, Sky News reported on June 7.
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
Editing by Liam Proud and Oliver Taslic
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