Newsquest plc History

Newspaper House
34-44 London Road
Surrey SM4 5BR
United Kingdom

Telephone: +44 181 640-8989
Fax: +44 181 646-3997

Wholly Owned Subsidiary of Gannett Co., Inc.
Incorporated: 1995
Employees: 5,700
Sales: £305.8 million (US$507.6 million) (1998)
NAIC:51111 Newspaper Publishers

Company Perspectives:

Newsquest's objective is to hold market leading local information franchises which deliver valuable, trusted products satisfying the needs of their audience. The business is market led and technology driven, focused on generating sustained superior profit growth.

Company History:

In less than five years, Newsquest plc has risen to become England's largest regional newspaper publisher and the third largest in the United Kingdom. Since the company's takeover by Gannett in June 1999, Newsquest is also part of one of the world's leading media companies. Yet Newsquest's focus remains the local and regional news front, where the company owns some 180 titles, including the world's oldest newspaper in continuous circulation, Berrow's Worcester Journal, first published in 1690. Some 51 of Newsquest's titles list are paid weeklies; another 11 titles are paid dailies. The bulk of the company's titles are free regional, local, and specialty advertising newspapers. The company's publishing portfolio ranges from the Northern Echo's 200,000-strong circulation to local papers with circulation of less than 15,000. More than 80 percent of the company's revenues are generated through advertising, especially through classified advertising. The company has also been an early entry into the Internet news market, with its trademarked collection of 'This Is ...' Internet sites. Newsquest also provides direct marketing and third-party printing services using the company's leftover printing capacity.

Origins in a 1995 Management Buyout

The United Kingdom's regional newspaper market of the 1990s was highly fragmented and technology poor in the mid-1990s. More than two decades of strict government-led merger controls--meant to prevent the appearance of monopolies in the country's highly popular local and regional newspaper circuit, which numbered more than 1,200 titles--had left many newspaper concerns cash-strapped, without the critical mass required for much needed capital investments. The government began to relax its rules in the 1980s, starting with the country's 'Fleet Street' of national news titles. The resulting consolidation of the national newspaper market enabled a massive investment program, bringing new printing and input technologies and machinery to the industry. These improvements not only helped the newspapers--and their owners--but the consumer also saw a better-printed, more easy to read product.

The regional market, however, remained highly fragmented among many smaller companies. Unable to make the needed investments and unable to grow through acquisition, many local and regional companies had no choice but to slash costs by reducing staff and sacrificing production quality in order to remain afloat. Meanwhile, a share of the market was held by several of the country's media giants, including Pearson, Reed-Elsevier, and Emap. Unable to expand their shares of the regional market, and seeking instead to capture more of the higher-end, higher-margin publishing markets, these companies began looking to shed their regional holdings in the mid-1990s.

By 1995, the government's willingness to allow greater consolidation in the regional market had resulted in a flurry of acquisitions. Consolidation took on greater steam as the major media groups began selling off their regional and local newspaper holdings. Reed-Elsevier, the Dutch-British media power, decided to shed its Reed Regional Newspapers subsidiary as part of its mid-1990s restructuring. While profitable, Reed Regional's 125-title holdings of regional and local newspapers no longer fit its parent company's focus. Upon learning of this decision, Reed Regional's CEO, Jim Brown, together with finance director John Pfail, asked to be allowed to perform a management buyout of the division.

Scottish-born Brown started his newspaper career as a junior reporter for Scotland's Ayreshire Post. Brown went on to build a well-respected career as a journalist, moving to the Glasgow arena, then joining Thomson Newspapers, where he was promoted into management. At the beginning of the 1980s, Brown was hired away by Reed-Elsevier, where he was placed in charge of the Reed Regional division. By the mid-1960s, Brown, at 60 years old, was facing retirement. However, Reed-Elsevier accepted his proposal to organize a management buyout bid to compete with other suitors of Reed-Regional.

For this, Brown and Pfail turned to buyout specialist Kohlberg Kravis Roberts (KKR), which had recently made headlines with the acquisition of Nabisco. KKR agreed to support the buyout, helping to raise a winning bid of £210 million. Brown, Pfail, and other management received a 12 percent share of the new company, while KKR held the remaining share. As Reed-Elsevier insisted on a name change, the new company took on the name 'Newsquest,' suggested by Brown's secretary during a brainstorming session.

Building a Name in the 1990s

Newsquest Media Group immediately set out to establish itself as a major player in the United Kingdom's regional newspaper market. The company's first expansion moves were made in April 1996, when Newsquest agreed with rival Johnston Press to exchange a number of titles. As part of that transaction, Johnston Press paid £15 million for Newsquest's Yorkshire-based newspapers, while Newsquest purchased the Johnston Press Bury, Lancashire, titles for £75 million. Newsquest sold another piece of its holdings in July of that same year, receiving £12.3 million from Midland Independent Newspapers for Newsquest's midlands region titles. These transactions set the stage for the company's next move, which catapulted Newsquest into the lead of the country's regional newspaper market. Meanwhile, Newsquest also invested in upgrading its machinery and technology, consolidating its printing and other activities. The company was also among the first newspaper companies in the United Kingdom to offer its news services on the Internet.

In December 1996, Pearson announced its intention to sell off its 65-title strong regional newspaper division, Westminster Press. Newsquest's bid, backed by KKR and CINven, a U.K. media investment fund, was finally accepted at £305 million. The purchase doubled Newsquest's size and made it a key player among the country's other new regional giants, Johnston Press, Trinity International, and Midland. Throughout the following year, Newsquest worked to absorb its new acquisition, which, although profitable at some £25 million per year, had been struggling. Many of the Westminster titles had suffered strong circulation declines, with resulting declines in advertising revenues.

Newsquest began trimming its titles in some places, including the sale of its Wessex group of titles to Bristol United Press for £35 million in October 1997, while launching new titles elsewhere. Among the papers launched in 1997 were the Harrow Times, a free paper; the Gravesham News Shopper, as part of the company's ten-title News Shopper series; and the Chessington and Hook Surrey Comet, launched in June 1997. By October of that year, Newsquest was ready to prepare a public offering. Pricing for the company's stock was expected to range from 250 pence to 290 pence per share. Although the company entered the London Stock Exchange at the low end of this range, the listing still valued Newsquest at some £500 million.

Public ownership allowed Newsquest to begin a new investment drive in expanding the company. After spending some £15 million on capital improvements, the company began an aggressive campaign of new title launches and acquisitions of existing titles. Among the company's acquisitions in 1998 were Contact-a-Car, based in Sussex; the London Property Weekly group of real estate newspapers, with their circulation of 230,000 households; Kinsman Reeds Ltd., with two northwest England titles; and the Review Group, with three newspapers in Hertfordshire. In 1998 alone the company spent more than £9 million on acquisitions of new titles. Newsquest's new launches included the Walton and Weybridge Guardian; the Sutton Comet, a paid-for weekly, the eighth in the company's Comet series; and the Staines Property Weekly, extending the company's newly acquired Property Weekly series. Beyond targeting the local market, Newsquest also expanded its niche titles, adding Auto Weekly, a car magazine published in conjunction with the Northcliffe Newspapers.

Early 1999 saw the launch of the company's 'This Is ...' Internet series. Offering portals to the company's regionally focused online titles, the 'This Is ...' series--already profitable, with revenues of more than £5 million--was seen as one of the company's most potent assets for the future. Newsquest was also finding success elsewhere on the net, with its AuctionHunter web site and with a deal to provide 'thin content' (headlines that linked to the 'This Is ...' sites) to major Internet providers. In March 1999, the company's Internet activities took on a further importance as the company joined with rivals Trinity and Associated Newspapers to extend the 'This Is ...' regional series to a 'This Is Britain' national site, with links to content provided from the three publishing groups' online and print titles. Operating such a strategic portal was seen as a means to ensure a strong early position in the expected dominance of the Internet in the early 21st century.

Acquisition by Gannett in 1999

Seeking to expand still further in the U.K. market--including placing a bid to buy the Portland and Sunderland newspaper group--Newsquest began shopping itself as an acquisition target. In June 1999, Gannett Co., Inc., the U.S. media giant and publisher of USA Today, announced its intention to acquire Newsquest for US$1.43 billion (£904 million). The purchase offer quickly won agreement from the company's largest shareholders, including KKR, which still held 36 percent of Newsquest.

1995:Management buys out Reed Regional Newspapers and forms Newsquest Media Group plc.

1996:Company acquires Westminster Press from Pearson plc.

1997:Public offering occurs on London Stock Exchange.

1998:Newsquest launches 'This Is Britain' partnership with Trinity and Associated Newspapers.

1999:Company is acquired by Gannett Co., Inc.

While Gannett denied that it meant for the Newsquest acquisition, its first in Europe since the early 1970s, to be a spearhead for a new European entry drive, Newsquest, now with the backing of Gannett's deep pockets (with nearly US$3 billion available in 1999), continued to seek to expand its own position. In November 1999, the company completed the purchase of the Hampshire Chronicle group of newspapers, including the Hampshire Chronicle itself, another of the United Kingdom's oldest continuing newspaper titles.

Principal Divisions: Blackburn Citizen (Lancashire); Blackpool Citizen (Lancashire); Bolton Evening News (Lancashire); Bolton Journal (Lancashire); Bradford Star (Bradford); Brighton & Hove Leader (Sussex); Enfield Independent (London); Evening Argus--Brighton (Sussex); The Evening Press (York); The Hereford Times (Midlands South); Lancashire Evening Telegraph (Lancashire); The Northern Echo (North East); Oxford Mail (Oxfordshire); Oxford Star (Oxfordshire); The Oxford Times (Oxfordshire); Sale & Altrincham Messenger (Cheshire/Merseyside); Swindon Evening Advertiser (Wiltshire); St. Helens Star (Lancashire); Sutton Guardian Series (London); Telegraph & Argus (Bradford); Times Advertiser Series (North East); Warrington Guardian (Cheshire/Merseyside); Warrington Midweek Guardian (Cheshire/Merseyside); Westmorland Gazette (Kendal); Wirral Globe (Cheshire/Merseyside); Worcester Evening News (Midlands South); York Star Series (York).

Principal Competitors: Daily Mail and General Trust plc; Hollinger International Inc.; Independent News; Johnston Press; Scottish Media Group plc; Trinity Mirror.

Further Reading:

  • Horsman, Mathew, 'Pressing On with Building a Regional Newspaper Empire,' Independent, August 12, 1996, p. 17.
  • Intindola, Brendan, 'Gannett Seeks to Buy Newsquest, British Chain,' Reuters, June 24, 1999.
  • Larsen, Peter Thal, 'Newsquest Links with Rivals to Give Local News on the Net,' Independent, March 23, 1999, p. 19.
  • Shu Shin Luh, 'Gannett to Buy U.K. Publishing Company,' Washington Post, June 25, 1999, p. E3.
  • Thackray, Rachelle, 'Me and My Partner: John Pfeil and Jim Brown,' Independent, May 12, 1999, p. 12.
  • Young, Andrew, 'Gannett Bids for Britain's Newsquest,' Reuters Business Report, June 24, 1999.

Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.