Trinity Mirror’s bid to merge with Express Newspapers, its rival publisher, faces possible opposition from pension trustees on both sides of the deal.
It is noted that Trinity Mirror is trying to thrash out a deal with Richard Desmond, the Express owner, amid fears that the trustees could oppose to the terms that were initially suggested.
According to sources, Desmond is asking £130m for a publishing group that includes the Express and the Star titles, as well as OK, the celebrity magazine.
£60m in cash would be paid by Trinity Mirror up front and £30m in new shares that would make Desmond approximately a 10pc shareholder in the enlarged firm. The balance of £40m would be paid to the entrepreneur over three years as cost savings are earned.
Once the deal is finalised, Desmond plans to promptly pay the same amount into the final salary pension scheme of the Express Newspapers, which at the end of 2016 had a funding shortfall of £19m. City sources said that the pension trustees of the Express Newspapers had raised concerns that the one-off payment would not be enough to assure the future funding of a scheme that suffered an actuarial loss of £66m last year.
On the other side of the possible deal, the trustees of Trinity Mirror have doubted the long-term wisdom of taking on £100m in new debt to expand in print markets that are declining. The pension scheme of the company has a deficit of more than £400m and the business has met political pressure to plug the black hole more quickly rather than devote resources to shareholder payouts or expansion.
Sources that are close to the takeover discussions, which are still assumed to be at an early stage, stressed that the final structure and price of the deal had not been finalised and that Trinity Mirror was decided not to overpay for the remaining media assets of Desmond. The billionaire has left broadcasting in recent years with the sales of his pornography channels and Channel 5.
Pension trustees hold a greater say in mergers following revisions to the Takeover Code in 2013. They have the right to provide their opinion on a deal to shareholders prior to its approval. A deal with Desmond would need approval from a majority of the investors of the Trinity Mirror.
It is assumed that Trinity Mirror has not made proposals yet to the pension trustees of Express Newspapers. The complex discussions are underway as part of a burst of activity in the newspaper market. DMGT has been considering a sale of its Metro freesheet that has attracted interest from the owner of the Evening Standard, among others.
Trinity Mirror’s rival in the regional market, Johnston Press, is exploring a debt restructuring as a Norwegian investor establishes a large stake. Trinity Mirror declined to comment.