Trader Media Group valued at £1.8bn in deal designed to secure the financial future of the Guardian and Observer print titles
The parent company of the Guardian and Observer has sold its majority stake in the firm that publishes AutoTrader in a deal valuing the business at £1.8bn, a move designed to secure the financial future of the print titles.
Guardian Media Group has sold its remaining 50.1% stake in Trader Media Group to private equity house Apax, its joint venture partner in the business since 2007, and will make between £600m and £700m from the deal. GMG's balance sheet will also be free of responsibility for Trader Media Group's debt, which stood at £560m as of last March.
The sale proceeds, coupled with GMG's existing cash and investment fund, which stood at £254m at the end of March, are expected to provide financial support for the Guardian, Observer and guardian.com website for at least 30 years, including funds for further potential digital and overseas expansion.
Guardian News & Media, the GMG subsidiary that publishes the Guardian, Observer, and guardian.com reduced its losses to £30.9m in the year to the end of March. One source said that most of the proceeds were likely to be invested to produce income to support the newspapers for the foreseeable future.
That would be in line with the strategy implemented by GMG chief executive, Andrew Miller, who has divested other non-core assets such GMG Radio – sold to Global Radio for £70m in 2012 – and has sought to increase digital revenues and significantly cut losses at the newspapers.
"This proposed transaction makes strategic sense as we focus GMG's activities on digital and print journalism," said Miller. "On completion, the sale proceeds will strengthen our balance sheet and position us for further investment and growth in our core business."
GNM cut its annual loss by 30%, and increased digital revenues by 28.9% to £55.9m in the year to the end of March.
GMG sold an initial 49.9% stake in TMG to Apax for£675m in March 2007, valuing the business at £1.35bn including debt.
The company used proceeds from sale to join forces with Apax in a £1bn deal to buy Emap, now called Top Right Group, which owns assets including trade magazines such as Retail Week and Construction News and the Cannes advertising festival.
This time around GMG is not expected to hit the acquisition trail, despite considering options including taking over the loss-making Independent and Independent on Sunday, or just snapping up cut price stablemate i.
The sale of the TMG stake will increase speculation over the future of GMG's last remaining major investment, the 32.9% holding in Top Right.
To date the strategy has been to improve Top Right's financial position – net debt was reduced 29% to £359 in 2012, although profits fell 18% to £70m on the back of a £36m investment programme – until the business can fetch a good return.
Apax had previously made two moves to try and buy the remaining 50.1% of TMG in the last 18 months, which would have netted GMG significantly less – £300m or £470m – than the deal struck on Tuesday.
GMG had rejected the offers, holding out for more money as the TMG business completed a successful move from print to digital.
The final edition of AutoTrader hit newstands in June last year – sales peaked at almost 370,000 in January 2000.
The closure of the print title had no negative impact on the business, with operating profits up a healthy 11% to £117.8m in year to the end of March 2013, the most recent publicly available figures.
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