An intriguing game of cat and mouse is being played between the Scottish businessmen Ben Thomson, of Noble Group, Martin Gilbert, of Aberdeen Asset Management, and Mark Shaw, of Hazledene and newspaper publishing group Johnston Press.
The triumvirate is said to have made a lowball £6m offer for Edinburgh based titles the Scotsman and Scotland on Sunday, an approach that the beleaguered group has rejected. The three businessmen are now said to believe Johnston Press is “in denial” about the seriousness of its plight and that it will eventually come round to accepting their offer.
Gilbert, Shaw and Thomson are said to be in this for the long-haul and seem quite prepared to wait for Johnston to see the logic of their offer.
Johnston Press, however, has apparently told them it won’t accept anything less than £40m for the two newspapers, whose circulation and profitability have been hit by the economic downturn. It is said to want to hang on to the Edinburgh Evening News, which, unlike the other two other papers, remains profitable.
Edinburgh-based Johnston Press acquired the newspapers from the Barclay brothers in a £160m deal three- and-a-half years ago.
On Friday, however, Johnston played what appeared to be a winning card when it revealed it had managed to renegotiate its £425m-plus debt pile. The group was nearly flattened by this debt, built up by Tim Bowdler, its former chief executive, to acquire dozens of regional newspaper groups in the UK and Ireland at the peak of the market.
Stuart Paterson, the company’s finance director, admitted to journalists last week that the revised £485m facility is not coming cheap. The 5% interest rate Johnston was previously paying has doubled to 10%. The company has also been obliged to issue warrants over 5% of its share capital.
The sea of red ink that has tainted Johnston Press in recent times refuses to go away. In Friday’s results, the group revealed its half-year losses had escalated from £53.7m to £94.2m; ad revenues slumped 33%, with sales 25% down to £219m in the six months to June 30. To add to the gloom, chief executive John Fry predicted the ad market would not recover before the end of 2010.
The company is said to be exploring other options for The Scotsman and Scotland on Sunday. These include forming a joint venture with Newsquest Herald & Times, publisher of the Glasgow Herald.
Under this scenario, Johnston Press and Gannett-owned Newsquest would knock together their central belt titles, combining the editorial team of the Herald and the Sunday Herald with that of The Scotsman and Scotland on Sunday.
But, in the reverse of an earlier abortive proposal from the former Scotsman publishing chieftan Andrew Neil, other parts of their operations — including advertising sales and information technology — would remain separate.
Stranger things have happened.
In the mad old days
Dominic Keane, ex-chairman of Livingston football club, was last week acquitted in Edinburgh High Court of a £2.3m loan scam.
For me, the trial highlighted some of the sloppiness that tainted Scottish football finance — and indeed business generally — during the boom.
In April 2001, it presumably seemed acceptable for Keane and his co-borrowers — lottery winner John McGuinness and refrigeration magnate Willie Haughey — to sign the agreements on a multi-million-pound loan from RBS in the hospitality suite of Hampden stadium, which is where Keane claimed the papers were signed.
The threesome were there for the Livingston/Hibs semi-final and Keane said they signed them there sometime between arriving at noon and tucking into their lunch at 12.45pm.
The three men needed the funds to pay for the development of Almondvale stadium in Livingston to ensure it could qualify for SPL membership.
I would hope that banks have since tightened up their procedures. Today they’re more likely to insist that anyone seeking a loan of this magnitude signs the paperwork in a bank branch in front of a witness and perhaps also in the presence of a solicitor.
McGuinness told the court he could not recall where he was when he signed the papers and Haughey claimed never to have signed them at all.
Axis-Shield injects hope
The accountants Grant Thornton recently warned that Scotland’s life sciences sector remains “embryonic” and “at least a decade away from achieving success on any scale”. It also said the sector would suffer from investors’ risk aversion.
Well , last week, Dundee-based Axis-Shield did its bit to dispel the bean counters’ gloomy assertion with some sparkling first-half results.
The company said strong demand for its diabetes-testing machines and a shift in its sales mix towards higher-margin products had enabled it to quadruple pre-tax profits from £1.6m to £7.5m on revenues that rose 18% to £51m.
Let’s hope Axis-Shield is not the only firm in the sector capable of recession-busting performance.
This Scottish Agenda column was published in the Sunday Times on 30 August 2009