DMGT will be Local World’s largest stakeholder, taking a 38.7% stake and £52.5m in exchange for Northcliffe. Yattendon Group, which owns Iliffe News & Media, will be the second largest stakeholder, with 21.3%.
Local World’s third biggest stakeholder will be Trinity Mirror, which will acquire a 20% shareholding for £14.2m. None of Trinity Mirror’s regional titles will be included in the group.
The remaining 20% of Local World will be owned by Artefact Group and Odey Asset Management.
Rupert Smith, Trinity Mirror’s head of communications said Local World’s initial focus was not the consolidation of the UK’s regional press.
"Local World is focused on the two businesses it brings together and has ambitious targets to grow them. This is the immediate plan," he added.
He did not comment on the possibility of Trinity Mirror joining Local World in the future but said a strategic update would be provided with Trinity Mirror’s preliminary results announcement on 14 March 2013.
However, David Elms, head of media at KPMG said the deal did show potential for consolidating the regional press. "Alliances and partnerships are being formed that would have been unthinkable a few years ago," he added.
He said the growing competition from digital media combined with the recession meant that regional newspapers needed to change their business models "and they need to do so quickly".
"In my view, there is a need for increasing scale in regional newspapers. Up until now regional newspapers have tended to react to the structural and cyclical challenges facing them with cost cutting measures," he said.
Elms said the way forward would be to form larger regional newspaper groups that cover the major UK conurbations and were therefore ‘national’ in coverage and perspective.
"Groups of that scale would have the power to attract national advertisers as well as local advertisers. They would be able to emulate developments in the UK radio industry where Global Radio has sought to develop national brands," he added.
The new regional newspaper publisher will publish more than 100 print titles, including 80 from Northcliffe and 30 from Iliffe News & Media, and 60 websites, and will have a combined audience of 6m in print and an online audience of 7m.
Steve Auckland, chief executive of Northcliffe, will become chief executive officer of Local World. Northcliffe’s chief financial officer Rachel Addison will also take up the same role at Local Group.
For the 12 months ending 30 September 2011, on a pro forma basis, Local World would have made revenues of £273m, an operating profit of £21m and had gross assets of £38m.
In the same year, Northcliffe made an operating profit of £17m, with an operating margin of 7%, on sales of £236m.
In its latest accounts, for the year ending 30 September 2012m, DMGT's regional division increased its operating profit to £26m, with an operating margin of 12%, on sales of £213m.
DMGT said the improvement reflected the success of its restructuring programme, which included the loss of 324 staff, equal to 13% of its total headcount.
The company’s revenue for 2012 was down 1% on the previous year at £2bn. Its pre-tax profit before tax was up 10% at £255m.
