Standard list shell National World (LON: NWOR) is acquiring JPI Media Publishing, which is the core of the previously quoted Johnston Press. It appears to have a bargain on its hands if it can reconfigure the business and reduce the dependence on revenues from the printed editions.
At the end of 2018, Johnston Press was placed in administration and the business was acquired by its bondholders.
National World is paying £10.2m and no debt is being taken on. JPI Media Publishing is the third largest local news group in the UK and includes titles, such as The Scotsman, Yorkshire Post, Portsmouth News and Belfast Newsletter.
JPI is estimated to have generated revenues of £85m and EBITDA of £6m in the past year.
There is an initial cash payment of £5.2m with two further instalments – £2.5m in March 2022 and £2.5m in March 2023. National World is issuing £8.425m of 10% convertible loan notes and plans to issue more. National Word had £4.31m in the bank at the end of June 2020.
National World will provide £6.5m of working capital to the newspaper group.
National World will use the assets to build a local online news publishing model. JPI has digital revenues of £13m a year.
Trading in the shares remains suspended until a prospectus is published and it may not resume until April. The prospectus is expected in March following a shareholder meeting to approve the issue of additional shares on loan note conversion or to raise more cash. The circular for the meeting will be sent this month.
The suspension price is 11p. That values the company at £5.94m. Even a relatively small profit would make that valuation appear low. Remember, there will be loan note interest and group overheads to be taken off of the profit generated by the business.
There could also be dilution from the conversion of the loan notes. The 11p a share conversion price suggests that it is likely to happen. There is also a 10% bonus payable to loan note holders at the same share price.
Trading is likely to resume at a higher share price.