The newspaper publisher benefits from investment in an early-stage business
Thursday 01 Apr 2021 Author: Tom Sieber

Amid all the hype around the multi-billion-dollar stock market listing of UK car marketplace Cazoo via a special purpose acquisition vehicle or SPAC in the US, it would be easy to miss the big windfall this could mean for newspaper publisher and shareholder Daily Mail & General Trust (DMGT).

We increasingly live in a digital world – a trend which has only been accelerated by the pandemic. As a result, more of our entertainment, social interaction and learning takes place online.

The trend has been perceived as a serious threat to so-called old media businesses like broadcasters and newspaper publishers.

However, DMGT’s investment in Cazoo shows how some of these traditional firms are harnessing their enduring reach to get in on the ground floor of disruptive and innovative new consumer-focused businesses.

As recently as 15 years ago people would have bought a used car from a dealership – often having consulted a classified advertisement in a printed newspaper, perhaps even one from DMGT’s own stable. Now Cazoo sells cars online and offers free UK home delivery.

DMGT said it expects to receive around $1.35 billion (£1 billion) for its stake in cash and shares in the listed Cazoo business, having originally invested £117 million into the company.

NEW MEDIA VENTURES

Cazoo is just one of the assets in DMGT’s dmg ventures arm which invests in companies with disruptive consumer propositions.

Other noteworthy holdings include Kortext, which is supplies digital textbook and learning solutions to UK universities, and Farewill which is an online platform which helps deal with all the paperwork when someone dies.

DMGT also has a 45% stake in UK hybrid estate agent Yopa and historically the company netted a significant gain from its holding in online property site Zoopla – now owned by private equity.

One way the DMGT has secured access to start-ups is to offer advertising in its publications, both print and online, in return for an equity stake.

This model looks to be one free-to-air broadcaster ITV (ITV) is keen to follow. The company recently launched the Media for Equity programme to take minority positions in direct-to-consumer and digital ventures in return for advertising airtime on its flagship channels and its ITV Hub video-on-demand service.

The first investment under this scheme, for a relatively modest £2 million, was recently announced in location identification service What3words. It is used by emergency services to reduce search times and by delivery companies.

Investors should keep tabs on this investment strategy to see if it could, as for DMGT, make a more significant contribution to ITV’s fortunes in the future.

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