Quick Pitch: National World (NWOR:L)

Merger Arb – 9.5% Upside

The play revolves around a consolidation in the UK-Irish regional newspaper sector. Media Concierge (private) is targeting National World (NWOR:L). The £0.23/share (9.5% upside) offer is still non-binding, however, the situation is compelling for a number of reasons:

• the buyer is NWOR’s largest shareholder (28% stake) and former business partner;
• confirmatory due diligence has already been completed;
• the buyer has made two bids – first at £0.21/share, and then the “final” bid at £0.23/share;
• target’s management said it is “minded to recommend” the final offer to shareholders.

Shareholder approval is basically guaranteed. NWOR’s management and advisors own 12% combined stake. Prominent British businessman Alasdair Locke owns another 9.6% and was noted to be acting in concert with management. Activist Harwood Capital holds 5% stake and has already entered into irrevocable support agreement. In total, that’s a 27% combined stake, which is 37% of all shares held by independent shareholders (excluding the buyer).

Antitrust risk seems negligible – Media Concierge focuses on Irish newspapers, while NWOR operates exclusively in the UK. The transaction itself is tiny, valued at just £50m.

With negotiations already in advanced stages, the signing of the definitive agreement seems imminent, likely before Christmas. PUSU date has been set for December 23. If the takeover fails, downside would be 30%+.

The buyer has certain reputational reasons to proceed with this merger. In addition to its regional newspaper operations, a big part of Media Concierge’s business is providing advertising services to media companies. NWOR was once one of its key clients, with Media Concierge handling marketing for NWOR’s newspapers.

It’s not clear why, but the relationship between companies soured:

• Late 2023/early 2024 – reports surfaced that NWOR had been considering large acquisitions just to dilute Media Concierge’s ownership and “free itself” from its influence.
• May 2024 – Media Concierge abstained from a vote to reappoint National World’s CEO.
• July 2024 – NWOR terminated the advertising partnership in July and switching to a competitor, Reach plc.
• November 2024 – the situation escalated further when NWOR first announced the takeover interest from Media Concierge and accused them of historical invoicing irregularities and withholding funds. It’s interesting that despite all this, NWOR still noted in the same press release that it “acknowledges the potential merits of the Possible Offer”. Media Concierge denied the allegations, arguing that NWOR breached the contract and that any withheld funds were justified by counterclaims. The target company still allowed the due diligence leading to the increased final offer.

While it’s unusual for a business conflict to culminate in a takeover, this move makes sense for the buyer. Acquiring National World will not only bring back a major business but also help both companies to save face after this public and messy dispute.

Major shareholders have likely played a part in the negotiations. For example, after the initial approach at £0.21/share, Harwood Capital publicly called for a “slight bump” and pushed the companies to halt the dispute in favor of the takeover discussions. Harwood Capital disclosed 5.3% stake shortly after the initial offer (although media reports say the activist has been holding NWOR since 2019).

Valuating NWOR is tricky due to the lack of local peers and the wide valuation ranges seen among global newspaper companies, which vary based on scale and progress in digital transformation. National World is still early in the transition with only 20% of revenues coming from the digital segment.

The current offer values NWOR at 4.5x TTM adj. EBITDA. Reach Plc, the only other UK-focused public peer that I’ve found, trades at 3.5x TTM adj. EBITDA. Reach is a several times larger compared to NWOR, but has a similar % of digital revenues and a bit more levered balance sheet. Media Concierge will likely be able to drive substantial synergies from this merger, so the price seems fine overall.