THE attempt by Daily Mail and General Trust (DMGT) to buy The Daily Telegraph has collapsed after the price rose too high for the company and its bid partner, CVC, the venture capital firm.
The publisher of the Daily Mail this morning confirmed that talks with Lazard, which had been handling the Telegraph sale, had been “terminated”.
“DGMT has enjoyed a good business relationship with CVC even though it was unsuccessful on this occasion,” the company added.
The announcement eased fears that DGMT would overpay to win the auction and helped DMGT shares add 10p to 703p in afternoon trade.
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DMGT’s elimination places the reclusive Barclay brothers, publishers of The Scotsman, in pole position to win the Telegraph. The brothers’ last remaining challenger is a joint venture capital bid from 3i and Veronis Suhler Stevenson
The remaining bids are thought to range between £660 million and £690 million, and the Barclays were last night indicating that they would be prepared to meet the top of that range. The auction is expected to conclude this week, although it is possible that a public announcement will be delayed until Monday.
It will be a stretch for the venture capital groups to justify the price of nearly £700 million. The 3i bid has got so far because the firm’s adviser, David Montgomery, the former chief executive of the Mirror Group, has drawn up a detailed plan to make cost savings at the Telegraph.
CVC in particular has become increasingly concerned about the price that Lazards, the bank handling the sale, is demanding. That left DMGT casting around for other partners at the last minute.
DMGT canvassed venture capital groups Candover Investments and Apax Partners, who were bidders at an earlier stage of the race. Both rejected DMGT’s approach yesterday.
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3i wants to back the Telegraph’s existing management to run the newspaper. By contrast it is not at all clear who Sir David and Sir Frederick Barclay would appoint, although Sir David’s son Aidan, who is managing the brothers’ bid, is expected to become chairman.
CVC was to have taken a majority stake in its joint bid with DMGT, to try to help the media group to minimise any objection to it controlling both the Telegraph and the Mail.
Last month DMGT looked likely to win the Telegraph, with an indicative bid thought to be as high as £680 million. However, its bid appears to have been pegged back after the publisher had difficulty in persuading any venture capitalist to back it at that price.
Separately, Lord Black of Crossharbour’s Hollinger Inc said it may default on debt because it cannot file annual results by the end of the month. It owns a controlling stake in Hollinger International, and if it defaults, its shareholding may pass to its bond creditors, who are owed $78 million (£43 million) in all.