OFT referral scuppers Kent newspaper deal

The KM Group has withdrawn its bid to buy seven newspapers in Kent from regional rival Northcliffe Media after the Office of Fair Trading referred the decision to the Competition Commission.

KM Group said it had made clear from the outset that if the decision was referred to the competition watchdog then it would withdraw its bid.

Before it dropped the bid KM Group was planning to acquire the Dover Express, East Kent Gazette, Folkestone Herald, Isle of Thanet Gazette, Medway News, the Thanet Times and the Herne Bay and Whitstable Times.

The OFT’s chief economist and claimed the merger would create a “monopoly” in local weekly newspapers in across East Kent. “We require compelling evidence to dismiss concerns that the combination of such close competitors as these might result in substantially higher prices or less choice for advertisers and readers,” she said.

“The evidence in this case did not permit us to clear this transaction; therefore we think it is appropriate that the merger is referred to the Competition Commission for a more detailed ‘second phase’ review.”

In a statement issued this afternoon KM Group chairman Geraldine Allinson said: ‘We have invested a huge amount of time on this project over the last few months. The costs and time required for a full Competition Commission review would be completely unreasonable for a business of our size and for a deal of this scale.

‘The acquisition would have been a good opportunity for our business. However, we have a long list of other developments already in process and we intend to continue to build on our unique blend of multimedia services for the people of Kent.”

Commenting on the OFT’s review process, KM Group’s former managing director Graham Mead commented: ‘We understand this is the first time the OFT has reviewed a case since the change in guidance.

‘While the teams at the OFT and Ofcom were positive and supportive, almost without exception, there were some painful moments. From a personal perspective, it feels that the process is set up for large, corporate deals, not small transactions involving businesses of our size.

‘The time and effort required appeared to be completely disproportionate to the transaction involved.

“Also, while we fully appreciate that the OFT team have to work to a strict framework, I don’t think that framework is at all relevant to the current state of our industry.

‘Nor does it in any way reflect the broader Government view on helping UK business by removing hurdles and giving it an opportunity to grow.”

Northcliffe’s group managing director Steve Auckland said the OFT’s decision “makes a mockery of politicians” claims they wanted to reduce red tape and allow consolidation in the regional press, adding: “We are not talking about a Google or a Microsoft here.

‘The OFT has to operate within a regulatory system that is not designed to cope with small local newspaper businesses that have no prospect of funding a Competition Commission review and are thus denied the opportunity to consolidate.”

Richard Karn, the managing director of Northcliffe Media’s south east businesses added: “‘The last twelve weeks has been a period of great uncertainty for staff who have responded magnificently. We look forward to being able to return our focus entirely to the challenge of growing our business, by meeting the needs of our many valued advertising customers and business partners across Kent.”

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