Terms set on Trinity's Mirror bid

British newspaper group Trinity International, which owns the Sunday Business Post, will have to sell Northern Ireland's biggest-selling daily newspaper, the Belfast Telegraph, and the Sunday Life, if its bid for Mirror Group Newspapers is successful.

The condition attached to Trinity's bid for Mirror is seen as a move by the British government to ensure that a balance between newspapers favouring the unionist and nationalist traditions is maintained and that the market positions of the unionist-leaning News Letter and nationalist-leaning Irish News are protected.

Industry sources believe, however, that the condition attached to the bid may be potentially terminal for Trinity's bid as the Belfast Telegraph and other operations in the North are estimated to represent about one-quarter of its profits last year of £83.8 million sterling (€126 million).

Other industry sources said, however, that Trinity might be able to live with the condition to sell the Belfast Telegraph given the attraction of the Mirror national and regional newspaper titles.

"I don't think it's enough to stop the deal, but it might make Trinity think twice," said WestLB Panmure analyst Ms Lorna Tilibian. "It's not a huge surprise," said another analyst who added that the Belfast Tele- graph would make up only 4 per cent of the combined group's operating profits. "If they sell it, the profitability of the titles and its prospects will be reflected in the price," the analyst said.

Mirror already owns the News Letter, but the British Secretary of State for Industry, Mr Stephen Byers, has ruled that if Trinity buys Mirror, then the Belfast Telegraph rather than the News Letter must be sold by the merged group. By doing this, Mr Byers has over-ruled the Competition Commission which had ruled that it should be the News Letter and its associated titles that should be sold in the event of a Trinity takeover.

Mr Byers has given Trinity and its rival bidder, Regional Independent Media, the go-ahead to revive their bids which had lapsed earlier this year after both were referred to the Competition Commission. Trinity had tabled a cash and shares bid of £927 million sterling for Mirror while RIM has £910 million sterling in cash.

RIM made no comment following the statement from the Secretary of State. Trinity said it was studying the contents of the report and would make a further announcement in due course.

Analysts expected Trinity's bid would be about £1.2 billion sterling. RIM, too, is expected to increase its offer while in the sidelines still waiting to make a formal bid is former Mirror chief executive Mr David Montgomery with the apparent backing of American investment bankers Kohlberg Kravis Roberts.

In giving Trinity the go-ahead, the Secretary of State based his decision both on competitive grounds and also the impact that a Trinity-Mirror merged group would have on the Irish News.

While acknowledging the Competition Commission's proposal that the News Letter should be sold "would remedy or prevent the threats the merger poses to the distinctive voice of the News Letter", Mr Byers ruled that: "It would not safeguard the future of the Irish News, because the threat there arises from the combination of Trinity's Northern Irish titles and Mirror Group's national titles."

In terms of competition, Trinity taking over the Mirror titles in Northern Ireland would increase its share of the advertising market by 15 per cent to 67 per cent. "Such a substantial increment on a large base would reduce competition for newspaper advertising, leading to higher costs for advertising in Northern Ireland than would otherwise be the case," said Mr Byers.

If RIM or any other bidder buys Mirror then no disposals in the North would be required because it has no newspaper operations there and thus there is no competition difficulty. RIM, like Trinity, has already given undertakings to maintain the unionist ethos of the News Letter if its bid is successful.

But if Trinity does bid and is successful, then there would be no shortage of potential bidders for the Belfast Telegraph, with its 130,000 circulation and stranglehold over the evening newspaper market. Currently the Belfast Telegraph outsells the News Letter and Irish News combined and is a hugely profitable arm of the Trinity group. The other Trinity titles in the North might be less attractive, but industry sources believe that any forced sale by Trinity would involve all its titles in the North as one unit.

The managing director of the News Letter, Mr Martin Gower, said his paper was adopting a "wait and see" position.

Nobody was available for comment at the Belfast Telegraph's head office, but a spokeswoman for Trinity Holdings in England said the required sale of the Belfast Telegraph in the case of a merger could "complicate matters".