The suggestion that Johnston Press may sell its newspapers in the Irish Republic for as little as â‚¬40m prefigures an abject conclusion to one of the most spectacular acts of boom-era media hubris.
During a whirlwind summer of deal-making in 2005, Tim Bowdler, the now-retired chief executive of Johnston Press, invaded the Republic of Ireland. Within weeks, he tied up three deals that transformed the company into the country’s largest publisher of local newspapers.
In June 2005, Johnston Press snapped up five Irish newspapers — including the Leitrim Observer and the Longford Leader — as part of its £155m acquisition of Score Press from Scottish Radio Holdings.
Next, in September, came the £139m purchase of The Leinster Leader Ltd, home to six weekly paid-for titles including the Leinster Leader, Offaly Express and Limerick Leader.
Also in September, Johnston Press announced that it would spend £65m on Local Press Ltd, the private equity-backed company that had bought out Trinity Mirror’s papers in Ireland and Northern Ireland in 2004. Local Press Ltd was home to four Irish papers, including the Donegal Democrat.
The top line suggests a total outlay of £359m. But not all of this was spent on papers in the Irish Republic. Both Score Press and Local Press had significant operations in Northern Ireland and Scotland.
Opinions vary on how much Johnston Press paid for its titles in the Republic. The figure of approximately â‚¬240m has been widely quoted. Johnston Press itself suggests its â‚¬173.6m of euro-denominated debt equates to the ‘approximate value of the investments made in the Republic of Ireland”.
Of course, the balance of power between euro and sterling has changed immensely since 2005. In 2005, â‚¬173.6m — the figure quoted by Johnston Press — equated to £121m. Today, it translates to £165m.
The more widely-quoted acquisition costs (â‚¬240m) would be the equivalent of £225m today.
Even if Johnston Press does sell its Irish papers for £50m and then uses the proceeds to reduce its euro debts, the company will remain saddled with at least £100m of loans dating back to its ill-fated Irish adventure.
This year, the cost of making interest payments on that debt will amount to at least £6m.
Given that advertising recession will probably erase most — if not all — of Johnston Press’s free cashflow during 2009, the most obvious way of paying that interest bill will be to make more journalists redundant at the titles that the company continues to publish.
If you require evidence that the casino logic of the noughties (which benefited Johnston Press directors more than most) has resulted in misery for thousands of hard-working journalists, look no further.
But as any fule no, comedy is the reliably dark underbelly of tragedy. As it turns out, the impending sale of Johnston Press’s Irish business provides comedic potential in spades.
It’s worth, for example, taking a look at who is interested in buying the Irish newspapers that Johnston Press admits are now worth a fraction of their original price.
One of the bidding consortia is led by John McStay, the insolvency practitioner and former chairman of The Leinster Leader Ltd. McStay was among the 27 shareholders who sold out to Johnston Press in 2005.
Another consortium is headed by Richard Findlay, the former boss of Scottish Radio Holdings, which offloaded Score Press to Johnston Press in 2005.
But perhaps the biggest belly laugh of all should be reserved for the financier who originally induced Tim Bowdler and Johnston Press to harbour such overblown ambitions for their Irish empire.
Back in 2005, Cathal Friel was a director of the Dublin-based investment boutique Merrion Corporate Finance. His firm advised Johnston Press on its deal-making in 2005.
Friel occupies a special place in the pantheon of spielers and crony capitalists who talked up the Celtic Tiger. Back in 2005, he endorsed Johnston Press’s acquisitions like this: ‘The Irish economy holds out the prospect of double-digit growth in newspaper advertising, which compares to a stagnant market in Britain.”
Last year, Friel — who seems to have a monopoly on brokering the sale of local newspapers in Ireland – found himself selling off a small family-owned newspaper in Galway.
Against the background of an 8.5% contraction in Irish GDP, his tune sounded familiar: ‘The business model is changing, there are definite challenges, but in many ways the future has never been brighter for the regional media in Ireland.”
Regardless of what happens to Ireland’s regional newspapers, the future certainly does remain bright for Cathal Friel. As the founder of Raglan Capital, the indomitable wheeler-dealer has been retained once again by Johnston Press, this time to advise the company on its withdrawal from the Irish Republic.