Pen­sion trustees prove a road­block to £130m merger of Trin­ity Mir­ror and Ex­press

The Sunday Telegraph - Money & Business - - Front page - By Christopher Wil­liams

A BID by Trin­ity Mir­ror to merge with ri­val pub­lisher Ex­press News­pa­pers faces po­ten­tial op­po­si­tion from pen­sion trustees on both sides of the deal.

It is un­der­stood that Trin­ity Mir­ror is at­tempt­ing to thrash out a deal with Ex­press owner Richard Des­mond amid con­cerns that the trustees could ob­ject to the terms ini­tially sug­gested.

Ac­cord­ing to City sources, Mr Des­mond is de­mand­ing £130m for a pub­lish­ing group that in­cludes the Ex­press and the Star ti­tles, as well as the celebrity mag­a­zine OK.

Trin­ity Mir­ror would pay £60m in cash up front and £30m in new shares that would make Mr Des­mond a roughly 10pc share­holder in the en­larged com­pany. The £40m bal­ance would be paid to the en­tre­pre­neur over three years as cost sav­ings are made.

Once the deal is sealed, Mr Des­mond plans to im­me­di­ately pay the same sum into the Ex­press News­pa­pers fi­nal salary pen­sion scheme, which at the end of last year had a £19m fund­ing short­fall. City sources said the Ex­press News­pa­pers pen­sion trustees have raised con­cerns that the one-off pay­ment would not be enough to guar­an­tee the fu­ture fund­ing of a scheme that suf­fered a £66m ac­tu­ar­ial loss last year.

On the other side of the po­ten­tial deal the Trin­ity Mir­ror trustees have ques­tioned the long-term wis­dom of tak­ing on £100m in new debt to ex­pand in de­clin­ing print mar­kets. The com­pany’s pen­sion scheme has a deficit of more than £400m and the busi­ness has faced po­lit­i­cal pres­sure to plug the black hole more quickly rather than de­vote re­sources to ex­pan­sion or share­holder pay­outs.

Sources close to the takeover dis­cus­sions, which are still said to be at an early stage, em­pha­sised that the fi­nal price and struc­ture of the deal had not been fi­nalised and that Trin­ity Mir­ror was de­ter­mined not to over­pay for Mr Des­mond’s re­main­ing me­dia as­sets. The bil­lion­aire has ex­ited broad­cast­ing in re­cent years with the sales of Chan­nel 5 and his pornog­ra­phy chan­nels.

Pen­sion trustees have a greater say in merg­ers fol­low­ing changes to the Takeover Code in 2013. They have the right to give their opin­ion on a deal to share­hold­ers be­fore it is ap­proved. A deal with Mr Des­mond would re­quire ap­proval from a ma­jor­ity of Trin­ity Mir­ror in­vestors.

It is un­der­stood that Trin­ity Mir­ror has not yet made pro­pos­als to the Ex­press News­pa­pers pen­sion trustees. The com­plex talks are un­der way as part of a burst of ac­tiv­ity in the news­pa­per mar­ket. DMGT has been ex­plor­ing a sale of its Metro freesheet that has drawn in­ter­est from the owner of the Evening Stan­dard among oth­ers.

John­ston Press, Trin­ity Mir­ror’s ri­val in the re­gional mar­ket, is seek­ing a debt re­struc­tur­ing as a Nor­we­gian in­vestor builds a large stake. Trin­ity Mir­ror, which will pro­vide a trad­ing up­date to­mor­row, de­clined to com­ment.

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