The Global Media Business Weekly

Will Montgomery buy the Telegraph?

David Montgomery, the veteran UK newspaper executive who is losing control of his listed local news group National World Plc to its largest shareholder, may be set to acquire Telegraph Media Group (TMG). An audacious c£400-500mn deal may be announced within the next few days with the presumed financial support of the UAE-backed RedBird IMI which has been forced by the UK government to sell TMG.

If it is confirmed, the acquisition (with backers unknown) would follow the founder’s exit from National World Plc. The £100mn-revenue, UK regional news group is being acquired by 26% shareholder Media Concierge, just five years after executive chair Montgomery’s £5mn IPO. The listed publisher of Yorkshire Post, The Scotsman, The Belfast News Letter and 100+ regional news brands had itself been involved in early bidding for TMG before becoming embroiled in its own ownership battle.

Montgomery, who holds a 7% stake in National World (NW), had mounted a long campaign for TMG that failed in the second round of an auction last September. He had said: “Our view remains that National World remains the best qualified among the various candidates for such a deal both in terms of industry qualification and also editorial independence, as well as the absence of any competition issues.”

It was, arguably, an even more ambitious strategy than Montgomery’s abortive 2022 plan to acquire his former company, Reach Plc, the UK’s largest newspaper publisher. But any such deal would have required his small local news group to raise hundreds of millions of pounds of fresh capital.

That’s where it gets interesting.

It is assumed that, apart from all else, Montgomery had hoped a big deal would dilute the shareholding (and influence) of Media Concierge owner Malcolm Denmark who, in addition to his longterm regional sales representation business Mediaforce, had also become the largest local news group in Ireland with ambitions of his own.

His personal tussle with Montgomery escalated last year with a refusal to vote for his re-appointment as a director (Yes), National World’s scrapping of its ad sales representation by Mediaforce and allegations of financial impropriety, before most NW shareholders approved the £65.1mn (£47.5mn enterprise value) go-private bid in December.

The agreed NW takeover – expected to be completed in the next two months – marks the end of an eventful four years since its own acquisition of the former Johnston Press in 2020. In the face of a declining regional news market, the 2020-22 pandemic and a portfolio whose revenue is still 70% print, Montgomery has invested not only in a succession of bolt-on acquisitions but also in launching Shots! tabloid TV channel and all-digital services including the eponymous National World. After an initial fundraise of £21mn, the subsequent four-year period (2021-2024) will have seen the group delivering a total of £44mn of EBITA and expected 2024 revenue of £104mn.

The NW founder had started to create a distinctive news group with growing emphasis on video, social media and national coverage. But few industry observers are surprised at his rivalry with Malcolm Denmark who became the company’s largest shareholder before mounting his, ultimately successful, takeover bid.

But David Montgomery never shirks a fight.

He is the former tabloid editor who became CEO of the Mirror Group in the chaotic years after the death of Robert Maxwell. Ever since he helped Rupert Murdoch to force through tech change in the UK’s national dailies, as editor of the News of the World, in the 1980s, Montgomery has been a passionate, impatient advocate for newspaper transformation. 

He was editor of Today, the UK’s first colour tabloid, before becoming CEO of Mirror Group Plc. In 1999, after seven years of pushing through cost-savings and coping with the aftermath of Maxwell, he quit after well-publicised boardroom disputes. The company’s market cap – ahead of its merger with Trinity Plc and the first dotcom boom – was then £1.4bn. It’s now £260mn.

Montgomery is what some Brits call “Marmite”: like the dark, salty spread, people either like or dislike him. Journalists are often negative, perhaps because 1) he was among the first in the UK aggressively to attack the historic costs of newspapers in post-digital times; 2) as a journalist himself, he had somehow “betrayed” his tribe by wanting to change almost everything; and 3) he doesn’t care what they say about him.

Montgomery: closing in on the Telegraph?

It is more than 20 years since Montgomery started to develop innovative ideas for partnerships between newspaper companies that would facilitate the sharing of technology and back-office services. He wanted to put his ideas into practice with Axel Springer which was briefly interested in a break-up bid for the Mirror Group after Montgomery had left it in 1999. Six years later, he founded Mecom which acquired, among others: Berliner Zeitung and Hamburger Morgenpost, in Germany; Orkla Media, of Norway; and Wegener, in the Netherlands. In 2014, the messy listed company was sold to De Persgroep, in Belgium. But Montgomery had already been forced to quit three years earlier.

His next venture was more successful.

In 2012, he formed Local World through a merger of more than 80 UK newspapers, including 16 dailies, from the Daily Mail Group and Iliffe News & Media. Three years later, he sold the business to his former company Trinity Mirror (now Reach Plc) for £220mn – some 6 x operating profit. Its 21% growth in digital revenues all but offset the decline in print advertising. Montgomery had taken unwanted newspapers and more than doubled their value in less than three years.

Next came National World Plc which IPOd in September 2019 with the declared objective of “creating a leading position in UK news publishing … by implementing a strategy of consolidation of audience reach, digital focus and modernisation”.

Montgomery, who had initally failed to acquire the longtime family-owned Johnston Press, swooped again after its borrowing and pension debt tipped it into insolvency. In 2020, he paid just £10.2mn (50% upfront) to reluctant hedge fund owners for what had become JPI Media, the UK’s third largest local newspaper publisher. The Scotsman alone (a small part of the JPI portfolio) had been bought for £160mn when it became part of then Johnston Press in 2005.

NW’s 2023 results were, in some ways, a suitably modest reflection of the company’s progress despite the pandemic, with revenue and profit seemingly static. But the company said that £1 invested in the 2021 IPO had became worth £1.35 (plus dividend income) in less than three years – and it seems clear that 2024 was a breakthrough year with likely revenue of £105mn, EBITDA of £14mn and margins finally starting to improve. It is likely that the digital and video activity had also started to transform the prospects, perhaps accounting for 30% of all revenue last year:

SnapShot  National World Plc
 £mn 2024* 2023 2022 2021
Rev 105888486
  Print70%73%77%84%
  Digital30%23%19%15%
Ebitda14101010
Margin13%11%12%12%
Net debt 102520
People1.2k1.2k1.3k1.3k
*Flashes & Flames estimate

For Montgomery, whose role has sometimes seemed, unashamedly, more editor-in-chief than executive chair, the first four years of NW have looked like preparation to become a major news group. That would have included step-change ambitions to acquire a larger business. He’s now set to do that on his own – and the likely UK-based targets seem clear enough:

David Montgomery’s targets? 
£mn OwnerRevEbitdaMarginPrice?
ReachListed569  9717%330
Montgomery’s longtime ambition to win back control of ‘his’ former Trinity Mirror may (or may not) have slipped away, now with the company in net cash and with its historic pension deficits under control. The group (£305mn enterprise value) seems to be set for some long-awaited, transformational M&A in 2025. But if not…
IndyLebedev   53     4 8% 75
Montgomery’s all-digital National World has been influenced by the all-digital success of The Independent. It’s increasingly international, with strong growth in the US. The Lebedev family ownership (which may be planning to sell its London Live TV channel and has turned its Evening Standard into a weekly) may be interested in monetising its Independent success. That could be an interesting opportunity for Montgomery…
TMGUAE268  6022%500
And, then, the Telegraph Media Group…

It is almost two years since the UAE-backed RedBird IMI acquired control of Telegraph Media Group by repaying the debt secured on it by the beleagured Barclay family which had paid £665mn back in 2004. The unwelcome buyer was forced to make plans to sell-on the news group by the last UK government whose rushed pre-election legislation prevented ownership by a foreign state. Having sold The Spectator for £100mn, RedBird IMI has been hoping to sell TMG for at least £600mn, a tough target stiffened by the withdrawal of the Daily Mail Group and GB News (whose Paul Marshall had acquired The Spectator).

Suddenly, there seemed to be surprisingly few options.

In what was intended to be the final round of bidding, the little-known Dovid Efune made a seemingly knock-out bid of £550mn, said to be £100mn more than anyone else. But the UK-born, US resident owner of the all-digital New York Sun has reportedly failed to secure the funding for his proposed deal. That’s the opportunity for Montgomery and perhaps others too.

It has become clear that media investor RedBird IMI (led by Jeff Zucker, former CEO of CNN) will be permitted by the UK government to provide non-shareholder loans to a TMG buyer, so it may recoup its investment over, say, five years. That may be how David Montgomery has been able to assemble a potentially winning bid. While there has been no confirmation yet of any impending TMG deal, the veteran news executive has been immersed in negotiations this week which may have involved his ambitious plans to expand the right-leaning Telegraph globally and to launch video ‘TV’ channels, especially in the US.

Given the provision of RedBird financing linked to future profit growth, Montgomery may be able to secure TMG for a minimum enterprise value of, say, £400mn – 7x EBITDA in 2023. That level of upfront price would be applauded even by some sceptics so, providing any potential performance payments were tied to challenging targets, it could become a great deal. A further £50-100mn (depending on results) could be met from the c£250mn cashflow of the next five years. That’s why Montgomery’s track record would have been preferred to that of Efune who may still be interested in TMG, despite the expiry of his exclusive negotiating period.

It could be a highly-attractive deal for David Montgomery and his backers, who may include some of the previous TMG bidders and interested parties.

An eventual consideration of, say, £500mn may still become a reasonable price for a business that, in 2023, generated 50% of its revenue from subscriptions (50:50 print:digital) and just 18% from advertising. But Montgomery might be able to do even better.

In addition to a global version of the National World all-digital brand he created, Montgomery would be characteristically committed to cost savings. On the basis of staffing which, in 2023, increased by 17% to 1,130, costing a total of £100mn (2022: £90mn), a new owner could target the 2020 level of spend – £87mn – which would be a 13% saving on the 2023 cost. That may, of course, be just the start of aggressive cost management for the inveterate news executive for whom the Daily Telegraph itself recently described the NW takeover as “the final chapter” in his career. Oops.

Happy New Year.