Evening Standard: When magnates do deals, price doesn't matter

You might have noticed Evening Standard editor Geordie Grieg’s recent assertion in the FT that the Evening Standard fetched a handsome sum when DMGT sold it to Alexander Lebedev.

The paper was sold not for a single pound as has been reported, but for a considerable but undisclosed price.

As I recall, it was Dan Sabbagh of the Times who originally suggested that Lebedev bought the paper for a token £1.

Being a well-mannered type, Sabbagh didn’t directly take issue with Greig’s claim. But he did go looking for clues within DMGT’s recently-published half-yearly accounts.

The accounts reveal that Alexander Lebedev initially paid DMGT £8.3m for the Evening Standard. Deal done, DMGT then handed back that £8.3m. In return, DMGT took a 24.9% stake in the newly-independent paper.

So how does DMGT value that stake? According to DMGT’s accounts, the valuation is nil. If this was the end of it, Grieg’s suggestion of a ‘considerable’price tag would be left looking tenuous.

But as a sharp-eyed Sabbagh notes, an in-house DMGT loan of £6.3mto Evening Standard Ltd was ‘provided for in full’as part of the deal.

Who did the providing? If Lebedev paid off the loan, Greig’s claim is strengthened. By anyone’s standards, £6.3m is a decent amount to pony up for control of the Evening Standard.

But what if DMGT merely wrote off that £6.3m loan, as Sabbagh suggests? Under these circumstances, it’s reasonable to suggest that DMGT paid Lebedev to take the Evening Standard off its hands.

Of course, it’s not worth pushing these numbers too much. I doubt that DMGT ever expected the loss-making Standard to pay back its £6.3m debt. Soft loans are a grey area, prone to accounting conceit.

It’s also worth remembering that the Lebedev Standard will be paying Lord Rothermere’s company handsomely for office space (and other things). According to DMGT, the Russians have already received an invoice for £1.8m.

Curiously, there’s no mention in DMGT’s accounts of Lebedev sending invoices the other way — to capitalise on the value of the Standard copy that DMGT continues to publish within London Lite.

Opacity aplenty, then. But who really expected anything else?

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