How will Jagran and Mid-Day complement each other?

By Sumantha Rathore , afaqs!, New Delhi | In Media | May 06, 2010
Jagran Prakashan has taken over the newspaper business of Mid-Day Multimedia at a 7:2 swap ratio

Jagran Prakashan Limited (JPL) has put an end to all speculation and has finally taken over Mid-Day newspaper. The deal is estimated to be worth Rs 175 crore, based on the current market price of the tabloid, though there is no cash component in the deal signed between the two media companies.

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Mid-Day Multimedia (MML) and JPL have informed BSE that the board of directors have approved the proposed scheme of arrangement between the two companies. Mid-Day has approved the de-merger of the investment arm of MML, holding investments in Mid-Day Infomedia Ltd., comprising Mid-Day tabloid. As per the deal, for Mid-Day newspaper, MML shareholders will receive two shares of JPL for every seven shares of MML held as of today.

However, there will be no change in the top management as Tariq Ansari, managing director, Mid-Day Multimedia and Manajit Ghoshal, chief executive officer, Mid-Day Infomedia will continue as before. Mid-Day Multimedia will continue to carry on with the radio business (Radio One) through its subsidiary, Radio Mid-Day West India.

Anand Shah, media analyst, Angel Broking Firm believes that it's a fair deal, signed at a swap ratio of 7:2. Keeping the current valuation of Mid-Day in mind, it gives a valuation of Rs 175 crore for the tabloid. The revenue of the acquired print business is Rs 95 crore, with an EBIT (earnings before interest and taxes) of Rs 17 crore. "Considering Mid-Day's debts of Rs 25 crore, Jagran has got a 30-40 per cent discount. It's a moderate investment. With the synergy between the two media companies, they will fill the gaps that they had till now."

For Jagran, he adds, "It will now have an English paper, becoming a formidable combination. Looking at the way things are right now, Jagran, given the scale it has, should ramp up Mid-Day."

Apart from this, experts believe that there's more to gain from the takeover. Jagran's tabloid, i-next, stands to get an increased content integration and support from Mid-Day. i-next hinges on a similar content mix in Hindi. It is being speculated that with Mid-Day's integration, i-next should, in all probability, acquire a similar look and feel as that of Mid-Day in the future.

However, according to a well-known media planner, the deal appears to be more of a 'desire' rather than a clearly thought out result and a little too expensive for Jagran. "On the face of things, it appears that Jagran took over the tabloid plainly for the sake of ownership and nothing else. Since Jagran wanted to have an English tabloid in its kitty, coupled with the fact that Mid-Day Mumbai is a fairly strong paper, I guess the investment makes sense from their point of view."

Echoing a similar opinion, financial analyst with an investment bank, says that "When you make an acquisition, you would look out for an add-on to the table from the acquired company but in this case, I can't find it. Mid-Day in Mumbai is on the decline since the last few years. There is not much scope for synergies of the two brands, except for a minor advantage it might get from Inquilab, the Urdu daily from the stable of Mid-Day."

Jagran will also gain from the Gujarati Mid-Day in its kitty. According to experts, now Jagran should be in a position to fulfil its "long cherished ambition" to extend its territory in Gujarat. "Gujarati Mid-Day was acknowledged for its superb quality by Gujarat based readers and advertisers alike. Unfortunately, no major thrust was given to this venture by the earlier management. Jagran was keen to enter Gujarat with a business daily a couple of years ago, which was aborted after the meltdown," adds Raghunath.

In the Northern belt of the country, about 20 million people can read and write Urdu, which may work to Jagran's advantage as and when it decides to expand the Urdu offering.

AS Raghunath, independent media consultant, says that Inquilab has remained static in Maharashtra for ages. It is expected that Jagran will reach out to the dense population of Urdu reading Muslims based in UP, Bihar, MP and other such pockets where Jagran has a presence. "It should be kept in mind that all state governments, as a commitment, place almost all notifications with a popular Urdu daily of the region. The group, with its extensive network, will try and evolve an improved version of Inquilab so as to make it the most aspiring Urdu brand to pan Indian Muslims."

He adds, "With a history of more than six decades of existence, Jagran, the largest read newspaper on this planet, was confined to a limited geographical spread of India. It operated within the Hindi cow belt. Following this acquisition, however, Jagran will get a huge makeover as it will become a multilingual, pan Indian media conglomerate. From being a single language daily group, it will now have its hold on English, Hindi, Gujarati and Urdu languages."

He adds that suddenly, the geographic spread of Jagran will also be extended to Maharashtra, Karnataka and Gujarat. "Also, the earlier Mid-Day group, after its expansion into various newer cities and business verticals, was gasping for investment. That will now be history. It will not be a surprise if Mid-Day's print publications see a hectic pace of activities now."

Incidentally, the talks of Jagran taking over the tabloid surfaced a month ago, when BlackStone announced the decision to invest Rs 225 crore in the company.