At The Times, Dan Sabbagh does the sums on Trinity Mirror’s share price. When Sly Bailey arrived in 2003, it was 370p. On Wednesday morning, it was 41p, valuing the entire company at a derisory £106m.
This, writes Sabbagh, means that the market is allocating a value of £72 to each of the Daily Mirror‘s 1.47m buyers. That’s around the value of six months’ continuous purchasing. As Sabbagh puts it:
Perhaps at that point the City believes that all of Britain will become blinded by a Triffid invasion, and hence unable to read. One can only wonder how investors would react if something genuinely serious happened.
Presumably, that’s what Richard Desmond is hoping for. Sabbagh suggests that the owner of the Express reckons it would cost £800m to take Trinity Mirror private. (This sum includes a bid premium, the company’s existing debt and some cash to top up Trinity’s pension funds.)
In relation to the £150m of operating profits expected from Trinity Mirror this year, that’s a fairly big number. It would imply doing a deal with net debt at x5.3 EBITDA. According to Alan Mutter, that’s not impossible.
If Trinity Mirror then nixed its dividend payments, which amounted to £63.7m last year, the company would enjoy wiggle room to accommodate the further YOY declines in operating profit that seem inevitable. Hell, it might even be able to pour some real money into investing for the future.
So a deal is do-able. But there are doubters. Desmond, who thinks £800m is too expensive, is one of them. As he told The Times mischeivously this week: “When it’s in receivership, we’ll look at it.”
Of course, there’s another alternative — specifically, the possibility of someone taking a strategic stake in the company.
Trinity Mirror will present its 1H results to the City on 31st July. At that point, conjuring a strategic investor out of thin air might be one way for Sly Bailey to keep her job.
Whether the de facto endorsement of her conservative regime that would accompany such a move is the right medicine for Trinity Mirror remains dubious.