Montgomery set to prove doubters wrong
David Montgomery is gathering industry support for a bid for DMGT’s regional newspaper interests, Northcliffe, providing an ideal opportunity to prove to a world of doubters he has always known what he’s doing says City A.M.’s Deputy editor, David Hellier.
I remember David Montgomery from my time at the Independent newspaper in the early 1990s when he, alongside Independent News & Media’s Tony O’Reilly, controlled the publisher. He used to occasionally wander around the paper’s Canary Wharf headquarters on the 18th floor of the tower, where his presence was rarely welcomed by journalists who found him cold, remote and mainly interested in cost-cutting.
Even at that stage, though, those who listened to the former editor of Today newspaper, like my friend the late Alan Ruddock, were impressed by his vision of the media as he grasped the challenges and opportunities posed by the growth of the internet. Montgomery was convinced that with a better marshalling of resource and more cross-fertilisation, media titles could protect and even grow their franchises even as circulation revenues from their paper products were rushing headlong into reverse.
I remember visiting the television production set-up being installed in Birmingham as part of Mirror Group’s Live Television and being genuinely convinced that a local television station making use of editorial resources from the Trinity Mirror-owned Birmingham Post genuinely had a chance of competing against other local media for advertising spoils but it wasn’t in the end to be. Live TV closed in 1999 after losing £25 million over a four-year period and was better known for its news bunny and weather in Norwegian than any of it local broadcasting.
Years later Montgomery set up Mecom, a publicly-listed group that put together a series of European newspaper assets he was determined to make profitable by reducing their costs and by extending their reach to embrace more digital products, thereby attracting digital advertising. His timing could not have been worse and Mecom struggled after a major slowdown in European advertising growth, not helped by union troubles in some parts the business and borrowings that were considered too high for the revenues the business was bringing in.
But the irrepressible Ulsterman is back again, now gathering industry support for a bid for DMGT’s regional newspaper interests, Northcliffe.
Some may wonder why DMGT would consider selling Northcliffe for around £100 million, given that an earlier bid at around £1 billion was turned down some years ago. The reason it might be attracted to an offer, even at a price as low as £100 million, is that Northcliffe, which accounts now for only around 5-6% of profits, produces a disproportionate amount of negative sentiment for the group, especially amongst US investors.
A new management team, principally chief executive Martin Morgan and Steve Daintith, is keen to present the group as a business to business player with high growth potential rather than an old-fashioned newspaper company coming to terms with an uncertain digital future.
Messrs Morgan and Daintith even recently fought a battle with Lord Harmsworth to get the name of the group changed but could not convince him to sever such an emotional link. But they did manage to oversee a change of broking advisers, axing long-standing brokers JP Morgan Cazenove, in an attempt to bring fresh thinking into the mix.
So a sale of Northcliffe makes a lot of sense strategically but it will be interesting to see how a disposal treats the huge pension liabilities that are attached to the regional newspaper assets.
Why Montgomery? There are few in the newspaper business who have worked so hard to come to an understanding of where future media revenues might come from and how to attract them from the starting point of a traditional newspaper set-up. “Nobody doubts that David has an encyclopedic knowledge of the industry,” says one banker close to the talks.
By all accounts, DMGT’s Steve Auckland would be chief executive of the new group Local World, which would also have backing from Trinity Mirror and Yattendon, leaving Montgomery as chairman.
Within the next few days – and probably ahead of DMGT’s results next week – we should know further details, including whether Michael Ashcroft and fund manager Crispin Odey will be fellow shareholders. This won’t be an investment to recommend to novices, if it comes off but it could well be the ideal opportunity for Montgomery to prove to a world of doubters that he’s known what he’s doing all along.