Newspaper publisher Trinity Mirror (TNI) is riding high after agreeing a £126.7m takeover of the Express and Star titles and guiding for full year results to be ‘marginally ahead’ of expectations. The shares advance 7% to 75p.
The deal is expected to be ‘materially earnings enhancing in the first full year of ownership’ and the company is looking to achieve annualised cost synergies of £20m by 2020 through the tie up.
Trinity Mirror is buying four national newspaper titles (Daily Express, Sunday Express, Daily Star and Daily Star Sunday) and three celebrity magazines (OK!, New!, and Star) together with a 50% joint venture interest in the Irish Daily Star, outside the UK.
The parent company behind the Daily Mirror sees three strategic advantages to the combination. Namely that it will:
‘Improve its print and digital editorial propositions by reducing duplication, sharing content and widening the breadth of editorial coverage with larger combined teams;
‘Provide advertisers and agencies with a large, high quality audience, including a combined digital audience of 234m monthly unique browsers (excluding apps); and
‘Improve its digital products through shared investment and best practice.’
The stock market is currently valuing Trinity Mirror as if it is in terminal decline with a price to earnings ratio of 2.2 (based on forecasts which do not take account the impact of this deal).
For context the FTSE 100 trades on a forward PE of 13.2.
Trinity Mirror’s print revenue was down 11% in 2017. The fact the company is targeting substantial cost savings on titles which have arguably already been starved of investment is not necessarily encouraging for the long-term future of the enlarged entity.
The risk is that by stripping costs out the company undermines the quality of its key brands.
If a publisher is not producing quality content then it will struggle to hang on to readers and ultimately advertisers whether this content is being accessed online or through a physical product.
Trinity Mirror will report its 2017 numbers in full on 5 March 2018.
