Kingdom row highlights competition

The current profitability of the regional newspaper market is illustrated by the competition between the Examiner and Independent newspaper groups for ownership of a Co Kerry title with a circulation of 5,000.

The Examiner's owners, Thomas Crosbie Holdings Ltd, is involved in a High Court case where it is claiming it signed the heads of an agreement to purchase the Kingdom with its owners in the early hours of May 19th. It is understood Thomas Crosbie Holdings subsequently received a letter from the Kingdom's solicitors disputing whether any binding agreement existed. The matter is now before the High Court.

Thomas Crosbie Holdings has made several attempts to buy the Kingdom and gain a foothold in the Co Kerry market. The approach in May was prompted by Thomas Crosbie Holdings becoming aware of the efforts of Independent Newspapers to gain control of the title.

In March, Mr Donal Roche, of the Independent group's solicitors, Matheson Ormsby Prentice (MOP), considered how the Independent could buy the Kingdom without triggering the attentions of the Competition Authority.

Documents drawn up by Mr Roche and seen by The Irish Times state that for Independent plc to acquire any interest in excess of 25 per cent in any newspaper would require consent under the Mergers Act. "Because of the sensitive nature of such an acquisition, the past efforts by Independent in this regard and the personality of the present Minister, any application would almost certainly be referred to the Competition Authority." The Minister referred to is the Tanaiste, Ms Harney.

Mr Roche considered the chances of any deal being approved by the authority as "considerably less than 50/50". He therefore suggested an approach whereby Independent would purchase 25 per cent of the Kingdom and endeavour "to keep the value of the newspaper low". Mr Roche suggested the value could be kept low by any enhancement in its value being matched by an increase in loans due to the Independent; and through any profits it makes being "paid to Independent through printing costs and by interest payments on the loan".

However, the solicitor advised that even with this scheme the Independent could not be assured that the Competition Authority would not decide the company "controls" the Kingdom and order it to desist from further involvement.

Mr Jim Farrelly, managing director, Independent Provincial Newspaper, was unhappy with the scheme and suggested a different one whereby the existing owners of the Kingdom would shut down the operation and the Independent would, after a month and using a shelf company, recruit the Kingdom staff and start up a new newspaper with a different title.

Under competition law the Independent group would have difficulty taking over an existing title but is not prevented from starting up a new newspaper. Mr Roche deemed that a challenge to the scheme suggested by Mr Farrelly might still be made by the Competition Authority, on the basis that it was an arrangement to restrict competition, but he believed the chances of seeing off such a challenge were better than under the previous proposal.

A memo drafted in March by Mr Andrew Donagher, Group Financial Controller, Independent Newspapers Ltd, and sent to Mr Gavin O'Reilly, managing director, outlined the background to the Co Kerry situation. The group's title, the Kerryman, was facing "increasing competition" from the Kingdom and Kerry's Eye (circulation 20,000). In addition the Examiner group was actively canvassing business in Kerry "and are also apparently interested in either acquiring or setting up a weekly title in the area".

The memo stated that Ms Anne Lunden, a major shareholder in the Kingdom, "clearly wishes to recoup" some of the investment she has made in the title. Sources claim Ms Lunden does not want to sell the newspaper. The Kingdom, which sells for £1, has weekly revenue of "approximately £3,800" and weekly advertising revenue of approximately £4,000. Overheads are approximately £8,500 per week, making for a weekly loss of approximately £500.

A sum of between £250,000 and £300,000 would be needed to invest in the Kingdom and provide the necessary loans, Mr Donagher said. A decision on whether to go ahead should be made "within the next 2 to 3 weeks".

In the High Court last week it was agreed that the Kingdom would not be sold pending the determination of the proceedings between it and Thomas Crosbie Holdings. The hearing was adjourned to June 14th.