The Guardian's head of media Dan Sabbagh has a stab at putting a valuation on the Daily Mail and General Trust's regional newspaper arm, Northcliffe, today.
It follows speculation that Trinity Mirror may be interested in taking control of Northcliffe in return for giving DMGT cash and shares.
Sabbagh writes: "Viscounts and other readers need to quickly forget that DMGT walked away from an offer from Gannett understood to be worth more than £1bn back in 2006, and face up to the cold hard realities of local newsapers today. The easy part is to look at the size of the Northcliffe business – revenues of £294m and operating profit of £30m in the year just closed, which ends for no very good reason on October 3.
"Now we are onto valuation. Well, let's make a comparison with Trinity Mirror. Trinity Mirror (yes there's a national title in there, but plenty of regionals too) is expected to produce about £120m of operating profit this year. Compare that to the company's enterprise value: debt of £308m plus sales of £185m equals £493m – and a rather dismal valuation multiple of, well, four times. But anyway, that's what the market thinks newspapers are worth.
"So back to Northcliffe. Now some spinners claim that Northcliffe is only worth £60m, which is clearly not the case. But on a debt-free basis, the whole portfolio may only justify a price tag of £120m, which is so lousy that DMGT might only be willing to contemplate a deal if it could take at least some paper. At least then, if the economy recovers, DMGT participates in any upside the Trinity Mirror share price can muster."
Sabbagh says the key problem for any deal is Trinity Mirror's generally beleaguered share price.
- Northcliffe worth just £120 million? I remember when it acquired the Nottingham Evening Post in 1993 from T. Bailey Forman in a deal worth £93 million.