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