Independent loses out to US firm in bid for Scottish paper

TONY O’REILLY’S Independent News & Media looks to have lost out in a battle for control of the Glasgow Herald.

Dr O'Reilly's offer, which is being backed by venture capital firm Providence Equity Partners, is some 7 million lower than that of Gannett, the US publisher of USA Today.

According to a report in yesterday's Mail on Sunday, the Irish media tycoon has decided not to increase his 328m bid to match Gannett, even though he has the support of the Herald's staff. Workers on the Glasgow-based title believe that under Dr O'Reilly, who already has extensive newspaper interests in Britain, their jobs would be safer and would benefit from access to the Independent's London advertising sales operation. He had also offered to move some of the Independent's editorial and production staff from London to Glasgow.

Gannett which bid 335m and Independent were the two

remaining bidders after the millionaire Barclay brothers, owners of the rival Scotsman group, were excluded from the race over competition fears and from objections from Scottish politicians. The loss of the Herald will be a bitter blow for Dr O'Reilly, as the acquisition would have boosted the

profits of Independent's national newspaper titles in Britain.

Its flagship publications, the Independent and Independent on Sunday, lost almost 25 million in 2001. Recent circulation figures in Britain saw the Independent and the Sunday title fall by 11%. INM acquired overall ownership of the papers in 1998.

However, the failure to capture the paper could turn out to be a blessing.

Independent is already saddled with nearly 1.4 billion in debts and the markets would be reluctant to see this rise any higher. Independent News & Media planned to use the proceeds of a sale of convertible notes in its Australian subsidiary APN News & Media to fund its part of the bid with Providence. The loss of the Herald will cap a miserable few weeks for INM

following the Irish Takeover Panel's criticism of the way it went about a share purchase. The acquisition of the Herald, which also publishers the Sunday Herald and Evening Times titles, will be a real coup for Gannett, which has lost out in recent months in its

attempts to buy other regional newspaper groups. Scottish Media Group put the Herald titles up for sale as an attempt to lower its debts. A bidding war between Gannett and Independent would have gone some way to lower its €625m debt pile. The sale is expected to be formalised this week.