Daily Mail & General Trust PLC’s (LON:DMGT) purchase of the i newspaper has come under scrutiny from the UK antitrust watchdog.
The Competition and Markets Authority (CMA) has served an initial enforcement order to the publisher of the Daily Mail, Mail on Sunday and Metro newspapers, which will stop the companies from integrating until the regulator makes a decision.
DMGT agreed to buy the i newspaper and website for £49.6mln last week, as the UK newspaper industry continues to see a wave of consolidation.
Chairman Lord Rothermere said the group was “committed to preserving its distinctive, high-quality, and politically independent editorial style”.
The company is competing with national newspaper rivals including Reach PLC (LON:RCH), publisher of the Mirror and Express dailies and their Sunday equivalents, and Rupert Murdoch’s News UK, which published The Times, The Sun and their respective Sunday editions.
UK merger rules require merging companies to comply with the CMA, which can stop companies from taking any “pre-emptive actions” like sacking key employees and selling off sites, to integrate the merging companies, since these might prejudice the outcome of a merger case.
If a company fails to comply, the CMA has the power to impose a fine of up to 5% on its entire turnover.
The i, which was founded in 2010, sells 170,000 copies of its newspaper each weekday, and turned over revenues of £34mln, DMGT said.
This is expected to bolster the right-wing leaning newspaper group’s profits and revenues, which were seen slipping in its latest full-year results as it entered the “next phase” of its transformation plans.
For the year ended 30 September, DGMT reported a pre-tax profit of £145mln down 21% year-on-year, while revenues dipped 1% to £1.4bn.
Shares in DGMT were up little moved at 846p in early trading on Friday.