The UK’s fourth biggest local newspaper publisher Archant has been bought out by a private equity firm in a deal which leaves shareholders with nothing.
Under the deal Rcapital Partners will take a 90% stake in the company, which publishes the The New European and the Eastern Daily Press as well as a number of local weekly news titles and monthly magazines.
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Archant is putting forward proposals for a Company Voluntary Arrangement which will see the company’s creditors – including HMRC and its bank – receive only a portion of what they are owed. The company’s pension scheme, which is believed to have deficit of around £50m, will be taken over by the government’s Pension Protection Fund.
The pension fund shortfall had been costing the company £3m a year.
The deal is an alternative to liquidating the company, which means creditors will get more of their money back and the new owners may have more room to invest.
Chief executive Simon Bax broke the news to staff in an email this morning, in which he said “the impact of the downturn on our advertising and circulation revenues due to Covid-19 has been profound”.
He said the new owners would invest in the business and provide a “sustainable financial platform upon which the company can continue its transformation”.
As a result of the deal, two of Archant’s holding companies – Archant Ltd and Archant Community Media Holdings Limited – will be placed into administration.
Archant Community Media Limited, under which it employs its staff, will continue to trade.
“I want to make clear from the outset that this new partnership will protect all of our staff and will allow us to continue with business as usual,” said Bax. “Our customers and our readers will see no disruption to the services and information we provide on a daily, weekly and monthly basis.”
Shareholders in Archant Ltd will lose out, however, including employees who held shares in the company.
Bax said: “With Archant Limited being placed into administration there will be no residual value in the shares. This will also apply to any shares held by employees in the Share Incentive Plan.
“This will be shocking and upsetting for all our shareholders but especially for those who are rightly proud of their families’ personal connections with the company and our titles going back many years.”
Archant was founded in 1845 in Norwich, where it is still headquartered, as the Norfolk News. The Colman family, who produce the region’s famous mustard, are among its shareholders, with Jeremiah Colman having been one of its founders.
In his email to staff, Bax said Archant will pay off a portion of its debts owed to creditors in full settlement of their claims.
The group’s private pension fund will retain the final 10% stake in the business.
Archant needs to secure at least 75% creditor approval by value for the CVA for it to proceed. Talks are already underway with key creditors through KPMG.
Said Bax: “I am confident that this arrangement will see us move forward with a new owner who is incredibly supportive of the business and our heritage, and that we have a bright future ahead.”
Chris Campbell, partner at Rcapital, added: “We are incredibly pleased to have worked alongside Archant’s management team and KPMG to put forward a plan that will restructure finances and inject fresh capital into one of Britain’s oldest local newspaper brands.
“We are hopeful, that with the support of its creditors, Archant will emerge from this challenging period as a stronger business that continues to provide a vital service to its clients and readership.
“Today’s announcement marks an exciting next phase for both Archant and Rcapital. I am looking forward to working with Simon and his team to deliver on the transformation plan.”
Archant made a pre-tax loss of £7.6m in 2018 on group revenue of £87.3m, which was down 9.6% on the year before.
The group still relies on print for 78% of its total revenues, although advertising, which makes made up the bulk of its income, fell by 10.8% to £64.2m and newspaper circulation fell by 6.6% to £16.4m in 2018.
Since March news publishers have been severely impacted by the coronavirus crisis which has disrupted print sales and advertising.
Archant recently sold Prospect House (pictured), its Norwich headquarters, to a local insurance firm, but continues to lease a floor within the building.
The company’s lease on its office in Barking, London, has also come to an end and it is understood to be looking at other premises.
Archant publishes more than 50 local news titles, including dailies the EDP, Norwich Evening News, Ispswich Star and East Anglian Daily Times. Among its weekly titles are the Ham&High and Romford Recorder, both in London.
It also publishes some 30 county magazines under the Life and Residential series and a dozen special interest titles, including Airgun World, Agricultural Trader and Living France.
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