Publishing group Sing Tao News was recently in talks as part of a syndicate to acquire the Hong Kong businesses of Swedish free paper publisher Metro International, it said in a filing with the Hong Kong stock exchange yesterday.
The publisher of Sing Tao Daily and two free papers - the Chinese-language Headline Daily and the English-language Standard - was trying to consolidate the city's highly competitive free paper segment by acquiring the local edition of Metro, launched in 2002 as the pioneer in this market.
Market observers said the syndicate comprised Sing Tao and Hong Kong-listed Lifestyle International, the operator of the Sogo department store in Hong Kong and Jiuguang department stores on the mainland.
The sources said there were three other suitors for Metro, but the best offer was from Sing Tao chairman Charles Ho Tsu-kwok and Lifestyle chief executive Thomas Lau Luen-hung - in the range of HK$180 million to HK$200 million.
Sing Tao was not immediately reachable for confirmation, but its filing said negotiations regarding the acquisition had been discontinued in mid-May.
The statement said: "It is possible that the syndicate may re-enter into negotiations" but no talks were taking place at present.
Six free newspapers serve Hong Kong's seven million people. Metro has a daily circulation of 400,000, while the market leader, Headline Daily, launched by Sing Tao in 2005, topped 880,000 last year.
Francis Lun Sheung-nim, managing director of Lyncean Securities, said: "Sing Tao would consolidate its market share through acquiring Metro. Metro not only enjoys a large circulation, it is also the only free paper that is allowed to be distributed in MTR stations."
The distribution network is one of the key factors for the success of a free paper, Lun said. In MTR stations, Metro reaches an audience that is sizeable and of high quality, as most passengers are of working age.
"There could be more action coming up in the free paper sector," Lun said. He said some of the smaller papers might close or be acquired by bigger players.
"I think HKET Holdings [owner of the Hong Kong Economic Times] should quit the free paper market, if its free daily, Sky Post, continues to make a loss," Lun said.
The number of pages in Next Media's Sharp Daily has shrunk recently, he said, and it "must be difficult to make money from the operation".
Trading in Sing Tao News was suspended yesterday and is expected to resume today. The firm's shares have fallen 9.2 per cent this year, against a drop of 6.3 per cent in the benchmark Hang Seng Index.