Johnston Press in talks to buy the i for £24m

Johnston Press, owner of The Scotsman and Yorkshire Post, on Thursday confirmed speculation that it is in “late stage discussions” with Independent Print Ltd for the potential acquisition of the i newspaper, the cut price London-based publication, for £24 million.

Regional press specialist Johnston, which owns more than 200 local titles, said the £24 million would come from its existing cash resources.

Johnston said that in the year ending September 30, 2015, the i had “unaudited carve-out operating profit of £5.2 million.”

“It is also expected that the acquisition would be cash generative and immediately earnings enhancing,” said Johnston.

Stockbrokers Peel Hunt issued a note on the potential acquisition, saying: “We cannot imagine (Johnston Press) bond holders or pension trustees will be happy.

“Johnston Press had cash at hand of £41 million at H1, but gross debt of £225 million, and operating trends have been deteriorating sharply since then.”

In a regulatory news service statement, Johnston Press outlined what it considered the key benefits of any deal to buy “the business and certain assets of the i.”

Johnston said the benefits included:

Greater reach — the combination “would create the UK’s fourth largest print publisher with over 600,000 paid copies a day.”

Increased scale — “greater reach would improve the ability to gain a greater share of the national advertising market.”

Growing revenues — “i has growing circulation revenues, and new opportunities arise from: a proposed digital product; new geographic markets; and from potential cross-selling of i’s advertiser base and vice-versa.”

Accelerated digital transformation through — “leveraging Johnston Press’ digital expertise to fully realise the i brand across digital platforms; the extensive Johnston Press network enables cross-promotion to grow audiences at minimal cost.”

Johnston said a further announcement will be made when appropriate.

It added: “There can be no certainty that the discussions between the company and IPL will lead to any definitive agreement concerning the possible acquisition or as to the final terms of any such agreement. Completion of the acquisition would be subject to the approval of shareholders of the company.”

Stockbrokers Peel Hunt issued an advisory note on the potential acquisition with a headline of “Potential i deal. More print, and bad for JPR bond holders.”

Peel Hunt said: “Our initial thoughts are that it should be rejected by stakeholders.”

“Life at Johnston Press is never dull,” said Peel Hunt. “Having just announced ‘a reduction of pension deficit,’ Johnston Press is now in advanced talks to acquire the i for £24 million …

“We cannot imagine bond holders or pension trustees will be happy. Johnston Press had cash at hand of £41 million at H1, but gross debt of £225 million, and operating trends have been deteriorating sharply since then.

“We are in favour of print industry consolidation. However, we are confused by Johnston Press’s business strategy as a regional publisher, which has focussed on paring back print, in favour of digital.

“The i is an innovative product, but it is wholly print and national. Nationals is a very competitive space … shareholder approval of this deal will be needed.”

The i is owned by Evgeny Lebedev and is said to sell about 275,000 copies a day.

Lebedev’s business also owns The Independent, Independent on Sunday, Evening Standard and local TV station London Live.

Media analysts have speculated that the Independent and Independent on Sunday might be forced to close without the support of the successful i.