Apax partner on reasons to buy newspapers

Stephen Grabiner, the Apax private equity partner and investor with the Guardian Media Group in the specialist media and conference group Emap, has a clear theory on why loss-making newspapers such as the Independent are attractive to individual investors. Apax uses privately raised funds to take over companies in order to build up their value before hoping to sell them on at an increased price. Talking at last week's media summit organised by Broadcast magazine, Grabiner, head of the media team at Apax Partners, said: "We would not buy a consumer newspaper, because it would be worth less in five years' time. But it makes them attractive to a different person, to those who want to milk them, not invest. "We know that consumers are quite robust in what they are prepared to go on paying for. So you can manage newspapers for cash, that makes them really attractive for some individuals, who go in and run them themselves. These businesses will last longer than we think." Questioned about whether he was referring to Alexander Lebedev's acquisition of a large stake in the London Evening Standard and the current negotiations to take over the Independent , Grabiner said Richard Desmond's long-term ownership of Express Newspapers was a "very good example of what you can do" in this business area. Under further questioning he agreed that the private equity model may not be as financially attractive as in the earlier part of the decade, but that bankers tended to have short memories. He said traditional media companies, in trying to respond to the world of digital and online media, had got it wrong from day one in a variety of ways, by giving away their content for free, and then hanging on to an advertising-funded model, when it was becoming clear that consumers are more and more likely to pay for content. The winners and losers of the digital revolution were already becoming clear, Grabiner added: it has been largely destructive to media companies, who had seen billions and billions of their value destroyed, as they were unable to cope and adapt, he said, while Google was taking an awful lot of business away. Grabiner also said that one of the terrifying aspects of the situation was that no one knew what new platforms would emerge in five years' time. So something worth a lot today could be valued at nothing tomorrow – he pointed to the dramatic collapse in the value of directories in which Apax and other media companies had invested heavily. He said that within Apax there is currently a debate about the attractions of free-to-air advertising-funded television: "The jury is out." Apax was actively involved in constructing a potential takeover of ITV in 2006 , before being trumped by BSkyB's decision to take a large stake. Grabiner said Archie Norman and Adam Crozier, the new chairman and chief executive of ITV, needed to move fast to make changes. But it was absolutely correct to keep the broadcasting and production businesses together, as they would have done. He said that robust media business areas included educational companies and specialist audience data gathering, tracking and analysis. Apax could not yet identify how video on demand or streaming of content will create serious competition for broadcasters. • To contact the MediaGuardian news desk email [email protected] or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. • If you are writing a comment for publication, please mark clearly "for publication".