The value of the Scotsman group of titles has collapsed from £160m to £4m, in a further sign of the pressures facing the traditional newspaper business model.
The Edinburgh-based titles, encompassing the Scotsman, Scotland on Sunday and Edinburgh Evening News newspapers and the Scotsman.com website, are given an “IP – intellectual property – value” of £4.3m in a creditors report published by the administrators of their parent company, Johnston Press.
The company paid £160m to buy the Scottish newspaper group from the Telegraph’s owners, the Barclay brothers, in 2005.
The creditors report for Johnston Press, which has been taken over by its biggest lenders after being crippled by debts of more than £200m, has revealed details of the newspaper group’s 11th-hour attempt to sell itself and crown jewel assets to pay its debts.
The report reveals that the i, Johnston Press’s star title acquired for £24m in 2016 from the Evening Standard and Independent owner, Evgeny Lebedev, was valued at £70m.
However, the paper, which makes profits of about £10m, attracted two bids with a top offer of just £35m. This is also the offer range that DMGT, the owner of the Daily Mail, received for the Metro franchise it explored selling this year.
The report, by the administrators AlixPartners, also includes a breakdown of individual valuations of titles and groups of titles conducted by the accountancy firm Mazars as part of the sales process.
The report reveals the extent of the decline of regional newspapers, with 130 titles listed as having an aggregate value of £28.4m, including the Scotsman group and Yorkshire Post group, valued at £5.5m.
Johnston Press’s deal to buy the Scotsman group of titles was one of the main acquisitions that lumbered it with a debt load that eventually sent it into administration.
One source close to the newspaper group warned that the prices were not truly indicative of the “trophy value” of the titles, or what they might be worth in terms of synergies and cost savings when plugged into the portfolio of a rival newspaper group.
The report reveals that one offer was made for the whole of Johnston Press, valuing it at between £140m and £150m, with no responsibility for the pension plan deficit.
This is below the value of the deal struck by the consortium of bondholders – CarVal, Fidelity, Benefit Street Partners and GoldenTree – who have come under fire for jettisoning pension responsibilities as part of its restructuring plan.
The Pension Protection Fund (PPF), which this week said it had concerns about the circumstances of the group’s administration, is to take responsibility. Thousands of staff will receive less than promised as a result of coming under PPF rules. The report says Johnston Press’s pension deficit is £47m but that on a “buyout” basis, the cost for an insurer to take it on, is £340m.
The report values the offer made by the consortium, which is operating as JPIMedia Group, at £181m. The deal included slashing Johnston Press’s debts to £85m, injecting £35m in cash, paying all trade creditors and continuing to employ and pay its 2,000 staff.
“I think the administrators’ detailed statement shows how hard the board tried over an 18-month strategic review,” said Camilla Rhodes, chair of Johnston Press.
“I’m sure what we have done provides the best possible outcome in order to preserve jobs and newspaper titles. It’s worth reminding ourselves that every local newspaper group, almost every media company, has suffered the most immense disruption from the internet in the past two decades.”
