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Activist investor builds largest stake in Johnston Press that could signal looming takeover

Johnston Press publishes regional newspapers Yorkshire Evening Post and Portsmouth News

The same activist investor that called a meeting with Johnston Press chairman Ian Russell last year shortly after the company cut the valuation of its assets by nearly half and increased its debt by 14%, has taken what is likely the largest stake in the publisher.

In September Crystal Amber raised its stake in Johnston Press from 5.4% to 6.7%. This week it built up its stake to 18.6%.

It is now thought to have the largest stake in the business, after Orbis Investment Management Ltd sold its entire 12.6 million shares on Tuesday, which represented at least an 11% stake in the business.

In November Johnston Press said, Orbis Investment Management Ltd was its largest shareholder with a 12.97% stake.

Crystal Amber met with Johnston Press chairman Ian Russell in September to decide whether to agitate for change. At the time the hedge fund’s chief executive, Richard Bernstein, told Reuters he hoped to help the management avoid a poor debt restructuring deal.

He said: “Our experience is that good management teams welcome our involvement. We hope that management at Johnston Press will allow us to help.”

The meeting was called shortly after the publisher cut the valuation of its title and print assets (excluding the i newspaper) by 45 per cent to £224m and increased its debt to £209m, up from £183m in 2015.

Shares in the regional publisher surged by more than 13% to 17p after Crystal Amber built its stake, but this is down 66% from the start of 2016, and nearly 90% from January 2015 when shares were at more than 160p.

It is not yet known what Crystal Amber's ambitions for the publisher are, and whether this could include a push for sale, but analysts speculate this a likely outcome given the scale Johnston Press' debt.

"Johnston Press has valuable assets across its portfolio. The sale proceeds of these assets could usefully pay down expensive debt," said Alex DeGroote, media analyst at Peel Hunt. "This process is something Crystal Amber may have a view on, together with the management of the company."

He added: "At the end of the day Johnston Press is about debt, not equity. The value of Johnston Press is c220m but 90% of this is debt, not shares. Unless Johnston Press can reduce and refinance this debt, or persuade debt holders to take a big haircut, the equity has little value."

Crystal Amber has a reputation for activist campaigns. It previously pushed Thorntons to put itself up for sale, resulting in the company being bought by Ferrero last year. It was also behind the sale of Pinewood studios, which agreed a £323m deal with a property investor in July.

The Drum contacted Johnston Press for comment who did not respond by time of publishing.

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