SCOTTISH Television yesterday unveiled a #120m deal to acquire Caledonian Publishing, the owner of The Herald and the Evening Times.
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The Glasgow-based television company said there was ``a compelling commercial logic'' for the merger, which would lay the foundations for a broad-based Scottish media group capable of further expansion.
Scottish Television will pay #52.5m in cash for the shares of Caledonian Publishing and will pay off its #67.5m debt.
The deal remains subject to vetting by the Office of Fair Trading, which could refer it to the Monopolies and Mergers Commission.
But, providing there are no regulatory hitches, it should go through in a matter of weeks.
Scotland's political parties and the Scottish Trades Union Congress expressed satisfaction over guarantees that the newspapers' editorial integrity would be maintained.
City investors also welcomed the deal, boosting Scottish Television's share price by 6p to 637p.
Scottish Television first announced that it was negotiating to buy Caledonian on July 11, when the newspaper group suspended plans for a stock market flotation, but the two sides had been talking since March.
The television company beat off a rival #116m bid from the Chester-based Trinity group of regional newspapers which came on the scene a month ago.
Mr Gus Macdonald, executive chairman of Scottish Television, said: ``We believe that the combination of the two businesses will yield substantial financial benefits and establish a platform for further growth.''
At the same time, he and Scottish Television managing director Andrew Flanagan pledged that The Herald and the Evening Times would retain their autonomy and editorial independence.
``We believe that it is very very important to retain the loyalty of readers that The Herald continues to maintain a very strong independent editorial line,'' said Mr Flanagan, who will take over as chief executive of Caledonian in succession to Mr Liam Kane.
He also expressed confidence in the editors of The Herald and the Evening Times, Mr George McKechnie and Mr John Scott.
``We believe they are excellent editors and we are very very supportive of them,'' Mr Flanagan said.
Mr McKechnie welcomed the takeover saying: ``I believe it is a takeover in the interests of the employees of Caledonian and also of those people employed by Scottish Television.
``It creates an important Scottish media company, and in the present environment that is vital for Scotland.
``It is essential for the people of Scotland that they have indigenous media groups strong enough to compete with groups outside Scotland and capable of representing the Scottish interest.
``The editorial independence of The Herald has been assured, and Scotland's largest quality newspaper will continue to reflect and comment on the
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issues as they affect Scotland.''
Mr Kane, who led a management buy-out of Caledonian from the Lonrho group in 1992, will leave the company with more than #1m once the acquisition has been completed.
In addition to realising #483,000 from the sale of shares and receiving #260,000 as a statutory severance payment - the equivalent of two years' salary - he will also receive an undisclosed golden handshake.
Mr Ron MacDonald, finance director, and Mr Ray Perman, development director, will also leave with generous packages, including unspecified ex-gratia payments.
However, Mr Iain Forbes will stay on as managing director for newspapers, in charge of day-to-day operations.
Mr Kane said the merger would create a strong Scottish-based media group and he praised Scottish Television for having ``very positive attitudes about taking the business forward''.
Scottish Television believes the merger will lead to annual cost savings of about #3m. These will come from operating common services rather than job cuts.
One source closely involved in the takeover negotiations said there would eventually be some job losses on the administration side, as in any merger, but these would number ``tens not hundreds''.
Labour's employment spokesman John McFall said he had been assured by Scottish Television that the acquisition was about growth, not retraction.
He described the deal as historic and said it would ensure Scotland was at the forefront of the media industry. ``I wish the new company well in terms of what it can do for Scotland and its people,'' he added.
Scottish Shadow Secretary George Robertson also said the takeover was good news. But, acknowledging that there could be job implications, especially in central services such as finance and administration, he said it must be handled with sensitivity.
An unreserved welcome to the formation of ``an important and powerful media group'' came from Scottish Tories' chairman Sir Michael Hirst. ``This is good news for Scotland,'' he said, emphasising that he expected no interference with the editorial independence of Caledonian's newspapers.
The SNP's arts and broadcasting spokeswoman Roseanna Cunningham also welcomed the creation of a strong Scottish-owned media group.
``Scottish TV has committed itself to the principle of independence, and we are confident the purchase will provide for continued diversity within the Scottish media,'' she said.
Ms Cunningham emphasised that the SNP will look for job levels and conditions to be maintained, a theme which the STUC also pursued.
STUC general secretary Campbell Christie said the deal offered the best guarantee that diversity of opinion in The Herald and Evening Times would not be affected.
He added: ``Scots are loyal and committed news enthusiasts. They have a right to expect a strong and distinctive voice from a range of sources.''
Councillor Marilyne MacLaren, convener of Scottish Liberal Democrats, said her party supported the takeover after receiving assurances that the integrity of the two newspapers would be guaranteed. However, party leader Jim Wallace called for the employment consequences to be clarified as soon as possible.
Mr Geoff Runcie, Glasgow Chamber of Commerce chief executive, said he was delighted that management control of the substantial new multi-media player in Scotland would be Scottish.
``The takeover will provide capital for further expansion of Caledonian Publishing, which can only increase its importance as a major Scottish resource,'' he said.
Last night, newspaper staff were pondering where exactly the #3m of promised savings would be made.
However, Mr Ian Bruce, Father of the Chapel of the National Union Journalists at The Herald, said editorial staff in both newspapers welcomed the takeover.
``It maintains ownership of two quality Scottish titles in Scotland, and we have assurances that current union agreements will be honoured,'' he said.
``We also welcome Gus Macdonald's public guarantee of editorial independence for both The Herald and Evening Times.''
Scottish Television made clear that it had no plans to move Caledonian's operations out of the company's headquarters in Albion Street, Glasgow.
Mr Flanagan specifically denied reports that printing would soon move to the Mirror Group's plant in Cardonald.
He said Scottish Television would go ahead with the planned installation of #2.75m of printing equipment at Albion Street later this year which will enable the The Herald and Evening Times to produce more colour pages.