London Evening Standard Sold To Former KGB Spy For ‘Nominal Fee’

image As the Daily Mail‘s own Richard Littlejohn might put it, you couldn’t make it up. In a statement to the City today, DMGT confirms it has agreed to sell the London Evening Standard to Russian oligarch and former KGB agent Alexander Lebedev for a “nominal fee”, reported to be as little as £1. It marks the completion of an audacious deal, the first in which a Russian billionaire has bought a UK newspaper and one that proves it now takes someone with extraordinary wealth who doesn’t expect to make a profit to consider buying a major print asset these days. Why is DMGT selling the Standard for next to nothing? In short, because it is losing upwards of £10 million a year and the company is more keen on advancing its B2B interests both here and internationally.

DMGT will retain a 24.9 percent stake in the paper and will handle printing and distribution duties as well as providing a home for the paper as part of a deal that could be extended beyond the initial ownership period after the deal goes through next month. DMGT chairman Lord Rothermere says in the statement that “Lebedev shares my commitment to newspapers and will continue to invest in the Evening Standard,” reflecting his reported concerns about the paper’s future under new owners. The 24.9 percent stake probably reflects the responsibility the company feels towards helping keep the paper alive, rather than a financial interest. The company stresses it is not considering selling anything else right now

Will Lebedev invest in the paper’s online output? The Standard‘s managers have preferred to concentrate on boosting print sales (or rather, increasing free give-aways to airports and hotels) and emphasising the exclusivity of the content the paper pumps out in its two daily editions. Standard.co.uk was launched last year — it still redirects to thisislondon.co.uk but at least gives the Standard an online brand presence. With full-rate sales below 160,000 and falling, will the new Russian bosses consider putting all the Standard‘s content online? Lebedev says he is “committed to strengthening the newspaper’s competitiveness,” so maybe that’s a good place to start.

The statement says Lebedev and his son Evgeny will form a new company, Evening Standard Ltd, that will control the paper and this appears to be in addition to Evening Press Ltd, a UK company Lebedev formed last last year which has £40 million in equity according to documents held at Companies House.

The deal, six months in the making, is also the first time DMGT has sold a title in many years. The company considered selling its Northcliffe Media local newspaper division in 2005 to bidders including Gannett (NYSE: GCI) and a private equity consortium. Final round bids were thought to reach £1.1 billion, short of the £1.5 billion DMGT was after so there was no sale. DMGT’s finance director told FT.com this week that the company didn’t consider the deal as “hugely significant” and saw it as getting rid of a loss-making asset.

UPDATE: PG reports that improving Standard.co.uk will be a priority for the Lebedevs once the deal has gone through and that the thisislondon URL — a hangover from DMGT’s national roll-out of the thisis brand across its regional Northcliffe Media division — will be fully dropped. As is to be expected with any M&A activity, a staff consultation is under way and the new regime is not ruling our job cuts.

— Breaking with UK newspapers’ traditional stiff-upper-lip approach to reporting their own fortunes, the Standard comments on the sale today online. Citing incorrect speculation as the reason behind the article, the un-bylined piece admits the paper has been incurring “very considerable financial losses” due to the advertising downturn and a change in readership habits and “faced the very real possibility of closure“. It was in this unsustainable context that Lord Rothermere began talks with Lebedev 18 months ago.

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