[A-List] UK news media: Herald newspapers

["Michael Keaney" <michael.keaney@xxxxxx>]

Q: When is The Scotsman not really The Scotsman?

A: When its owners are bidding to buy the Sunday Herald. By Business Editor
Kenny Kemp
The Sunday Herald, 3 November 2002

READERS of The Scotsman could once take some pride in that their newspaper
of choice had good sense, courage and was a paper of record. Indeed the
editorial page each day states that the founding conductors in January 1817
'pledge themselves for impartiality, firmness and independence ... with
their first desire to be honest'.

These are honourable virtues that have often been overlooked since the
arrival of publisher Andrew Neil, a former editor of The Sunday Times, back
in 1996. But last week the Edinburgh-based newspaper failed in a basic duty
to report that its owners, the secretive Barclay Brothers, were the real
subject of a debate in the Scottish parliament.

The paper did indeed report a debate on the media in Scotland and that the
SNP is calling for the power to regulate newspapers and broadcasting in
Scotland, but there was not a whiff of the controversial bid being made by
the Barclays for the Sunday Herald and its sister papers, the real reason
for that debate in the first place.

On Tuesday, Karen Gillon, Labour MSP and convenor of the education, culture
and sports committee, said: 'The committee is concerned that the sale may
lead to a loss of diversity within the Scottish media post-devolution,
particularly in light of a reported bid from the owners of The Scotsman and
Scotland On Sunday, which appears to be significantly higher than other
reported bids. The committee is of the view that a referral [to the
Competition Commission by department of trade and industry minister Melanie
Johnson] of this sale to the commission would be justified in such
circumstances.'

There are believed to be five remaining bidders for SMG's titles, which
include the Herald, Sunday Herald and the Evening Times, but the Barclay
brothers' bid is the most contentious.

The SNP culture spokesman, Mike Russell, told MSPs it was a source of
frustration that Scotland's parliament could not legislate on media matters
and that, 'in the matter of newspaper ownership, in the matter of television
news and current affairs and in the matter of regulation of the media, there
are key decisions to be made. This chamber should be the place to make
them.'

But if the chamber's work is not being 'fairly and impartially' reported by
an important section of the Scottish media then surely this is a serious
issue too. And what happens if this important section is then allowed to own
all of the broadsheet titles?

But the commercial reality of newspaper ownership has clouded the political
picture. SMG has a fiduciary duty to sell its publishing group to the bidder
who can clear the hurdles as quickly as possible. Put simply, the
shareholders come first unless regulation kicks in. SMG executives are
hoping for a quick sale to reduce some of its £400m debt, and early reports
suggest the Barclay brothers' bid is highest, at over £200m.

Yet the Barclays, should they be given preferred bidder status in the next
weeks, could face many months of regulatory delay, making the sale less
appetising for SMG's bankers and shareholders. And recent experience for the
likes of Trinity Mirror, owners of the Daily Record and Sunday Mail, and
Johnston Press, one the UK's largest major groups, show that the commission
can reject bids. That can be costly.

Technically the Barclays' bid does not appear to breach the UK national
circulation limit of 500,000 per issue, which is covered under 'special'
interest legislation about ownership. But under the 'general' interest
section of the competition act, there is no doubt that it is too political a
matter simply to ignore. Apart from the obvious argument about political
diversity, the prospect of one company owning the four central-belt
broadsheets, and controlling the advertising market for recruitment, car
sales and property might have serious problems.

Melanie Johnson, the UK minister responsible for competition, has already sa
id that in the event of the commission being asked to investigate the sale,
it would look at whether the transfer of ownership was against the public
interest.

The Barclay brothers insisted that the bid was from Ellerman Investments,
which is not part of Scotsman Publications' Press Holdings. So, they have
argued, this would not need a referral.

Yet Andrew Neil appears to contradict his masters. Last week, in the letters
page to the Daily Telegraph, he wrote to defend the Edinburgh group from an
item which appeared in a diary column. Neil said that the Scotsman group of
newspapers was not 'struggling' but that, like other newspaper groups, they
faced tough times. Indeed, said Neil, the company was in a healthy state
even compared to Fleet Street newspapers. Then came Neil's coup de grace.
'Healthy enough, indeed, to make a substantial bid for Herald newspapers,
which has been reported as the biggest, or second biggest, on offer.'

The Sunday Herald tried to seek clarification about this on Friday. But
Aidan Barclay, of Ellerman Investments, son of Sir David and nephew of Sir
Frederick, declined an invitation to comment. But the question remains: how
can the Barclays claim that this is an entirely separate group from Scotsman
Publications?

Meanwhile, a clearer picture of Scotsman Publications' own finances emerged
last week when accounts revealed that pre-tax profits fell in 2001 to
£533,000 from £1.7m the previous year. Yet the group's profits when it
brought Andrew Neil on board were £11m a year. Neither wonder that Neil is
eyeing up SMG's publishing group profits, which are a reported £17m a year.
The Barclays say they will make £10m savings a year by slashing costs and
certainly jobs.

The other bidders are still being sifted through by executives at SMG's
Cowcaddens HQ, but they are believed to be Candover, the venture capital
company that sold Regional Independent Newspapers to Johnston Press for
£560m; Archant, the 150-year-old business, formerly the Eastern Counties
Newspaper Group, which employs 2400; Daily Mail and General Trust, owners of
the Mail, as well as the regional Northcliffe Newspaper Group; Gannett, the
largest newspaper publisher in the US, with a flagship title, USA Today, and
owner of UK publisher Newsquest; and Providence Equity Partners, backed by
Anthony O'Reilly, owner of Independent News & Media, and speculator George
Soros.

Most of these bidders will need to be considered for referral, but in nearly
all of these cases it is likely that they would meet competition
requirements.

The remaining question is the price -- and that is still in the hands of the
merchant bankers, Greenhill & Co, who report they are 'happy with the bids
so far.'