Scottish Radio Holdings has taken a major step into the Irish regional newspaper market with the acquisition of the Kilkenny People group for €35.6 million (£28.2 million). SRH, which already owns the Leitrim Observer, was rebuffed this month in a £1.9 million bid for the Midland Tribune and is completing the acquisition of Ireland on Sunday for €9.5 million.

The Kilkenny People acquisition will make SRH the second-largest regional newspaper group in Ireland, after Independent News & Media. Industry sources believe that SRH, with extremely deep pockets after raising £75 million sterling (€120 million) in a share issue last February, is on the lookout for other Irish titles.

Figures released by SRH show how profitable regional newspapers are on the back of strong advertising revenue and buoyant circulation. The Kilkenny People group - whose other titles include the Tipperary Star and the Nationalist & Munster Advertiser - has combined circulation of 43,000 a week and readership of more than 180,000. The group had operating profits last year of £2.3 million on turnover of £8.5 million. That equates to operating margins of 27 per cent.

SRH is buying the Kilkenny People from Mr John Kerry Keane and his family interests. The consideration is made up of £1.2 million in cash and £27 million in interest-bearing loan notes. In addition, SRH is paying £1.7 million for the group's premises in Kilkenny. As well as the three titles, SRH is also getting the colour magazine printer, Wellbrook Press, for its £28.2 million.

This acquisition by SRH is only the latest in a series of moves in the media industry in the Republic and Northern Ireland. As well as its regional and Sunday newspaper interests in the Republic, SRH also owns 22 per cent of the national radio station, Today FM. In the North, its Morton Newspapers subsidiary operates 20 local newspapers while it also owns the biggest independent radio station, Downtown Radio.

SRH finance director Mr John Bowman said: "Five years ago we had no media interests in Ireland North or South, but we now have a very significant business. The Kilkenny People deal now gives us critical mass in Ireland."

Mr Bowman would not be drawn on whether SRH intends to further expand its presence in Ireland. "Ireland is a very good place to do business, the economy is the envy of everybody and we are very comfortable in Ireland. We're very happy to do deals which make sense and this latest deal makes sense for us and the vendors," he said, adding that the Kilkenny People would be immediately earnings-enhancing for SRH.

"We've spent £100 million sterling on acquisitions in the past 10 years and a lot of that has been spent in Ireland. The £75 million we raised in February has made us a lot stronger to go forward," Mr Bowman said. He added that SRH is not particularly worried about inflationary pressures in Ireland or a possible slump in the economy. "We're not complacent and we are always realistic, but we always try and look on the bright side."

With SRH, Mirror Group, Thomas Crosbie and the Leinster Leader group all expanding their Irish regional newspaper interests in recent years, industry sources believe that other regional newspaper groups may be tempted by the sort of prices that are currently on offer. Most of the remaining groups are family-owned and as Thomas Crosbie managing director Mr Anthony Dinan told The Irish Times last year: "In my opinion it's a good time to sell out."

In a separate development, Independent News & Media - whose size in the regional newspaper market effectively prevents it buying up other titles - has appointed Mr Frank Mulrennan as managing director of its Drogheda Independent subsidiary. The Drogheda Independent group publishes five titles covering Drogheda, Dundalk and the Fingal area of north County Dublin, with combined circulation of 30,000 copies. Mr Mulrennan is currently business editor and associate editor of the Irish Independent.