According to DMGT, the ‘i’ has an established reputation for quality journalism with retail sales of approximately 170,000 newspapers each weekday and over 190,000 copies of the iweekend each Saturday. The website, inews.co.uk, attracts approximately 300,000 daily unique browsers. In 2018, the ‘i’ generated £11m in cash operating income and operating profit from £34m revenue. It is anticipated that the acquisition will be reviewed by the UK Competition and Markets Authority.
Lord Rothermere, Chairman of DMGT, commented: “We are delighted to welcome the ‘i’ to our stable of media brands. It is a highly respected publication with a loyal and engaged readership. We are committed to preserving its distinctive, high quality and politically independent editorial style. The acquisition of the ‘i’ is both strategically and financially compelling for DMGT and there is scope for potential synergies in the future, notably from dmg media’s existing infrastructure and in advertising sales. The business will benefit from DMGT’s long-term approach and commitment to investing in editorial content. We also see good opportunities to develop inews.co.uk, a growing digital media asset. Financially, the ‘i’ will be a strong cash generator for the Group as we continue to invest across the portfolio, both organically and through acquisitions.”
DMGT also released the following Q&A with Paul Zwillenberg, CEO of DMGT, to explain the acquisition:
Q: Why are you buying the ‘i’?
A:
The acquisition of the ‘i’ is both strategically and financially compelling for DMGT.The ‘i’ is a strong print title and has an established reputation for quality journalism, with three quarters of revenues coming from its cover price and a quarter from advertising.
Despite the structural challenges facing the industry, its revenues continue to grow which is testament to the quality of the product. We are confident that, under the ownership of DMGT, it will benefit from the Group’s long-term approach and commitment to investing in editorial content. In addition, we are acquiring a digital business where we see the potential to invest and deliver growth.
The business generated £11m of cash operating income in 2018 and we believe that there are opportunities for synergies. The ‘i’ is a cash-generative print title and has a clear role to play within the DMGT portfolio as one of our ‘Predictable performer’ businesses.
Q: Are you going to change the editorial position of the ‘i’ to align it more with the Daily Mail?
A:
The ‘i’ has a different editorial style and tone to the Mail and the audience has a different demographic. I want to make absolutely clear that we will ensure that the editorial independence of the ‘i’ is preserved. Its readers value its distinctive style and politically neutral approach and we are committed to maintaining that.We take a long-term approach and we will invest in high-quality editorial, just as we have done so successfully at the Mail titles.
Q: What synergies do you expect from this acquisition?
A:
Firstly, I want to emphasise that the editorial team will retain its complete independence. We understand it is vital to preserve the distinctive, high-quality and politically independent editorial style of the ‘i’. Delivering quality content in both print and digital formats is a core competence of DMGT. We will invest in the editorial content as we believe the ‘i’ can benefit from DMGT’s long-term approach to investing through the cycle to support market share gains.We do expect there to be cost synergies as we believe that dmg media’s existing back-office infrastructure can support the ‘i’, which will deliver some savings. Also, there are likely to be some synergies around printing, production and distribution but they will take a little time to come through.
In addition, there may be some revenue synergies over time. For example, there would be opportunities to sell advertising that reaches a larger audience, in the same way that we have benefited from combining the Metro’s and Mail’s sales operations.
During a review by the UK Competition and Market Authority, the ‘i’ may have to be “held separate” and run independently of the rest of DMGT but we would still expect to be able to realise synergies over time.
Q: Does this indicate that your acquisition strategy is going to be focused on Consumer Media rather than B2B?
A:
Our acquisition strategy is unchanged. It is focused on delivering long-term value creation for our shareholders.We look at a range of potential M&A targets from early-stage businesses right through to more established highly cash-generative businesses, which we refer to as ‘Predictable performers’. The ‘i’ belongs in the ‘Predictable performer’ category.
We also actively continue to review potential B2B bolt-on acquisitions which would help our businesses to build scale and further strengthen their market positions.
Although we are in a strong net cash position, I want to emphasise that we remain patient and will continue to be highly disciplined in our approach to M&A. We will only acquire businesses which are the right opportunities, at the right time, at the right price for us.
Q: DMGT seems to be becoming increasingly Consumer Media weighted. Should we expect this trend to continue? Aren’t there attractive B2B businesses available to acquire currently?
A:
Consumer Media’s weighting as a percentage of Group revenues has increased in recent years following some planned B2B disposals and this acquisition will amplify that.We see plenty of attractive opportunities for organic growth in our B2B businesses and we are investing in them. We are also seeing opportunities for B2B bolt-ons but we will remain disciplined in our approach. We do not target a particular ratio between B2B and Consumer Media.
