Johnston Press, the regional newspaper group with more than 200 years of ties to Scotland’s Johnston family, turned to a Malaysian billionaire yesterday to help to raise £212 million.

Ananda Krishnan, worth $4.3 billion (£2.2 billion) according to Forbes, will spend £120 million taking a 20 per cent stake in the company behind The Scotsman and The Yorkshire Post and will become the newspaper’s principal strategic shareholder.

The Johnston family, who bought their first newspaper, the Falkirk Herald, in 1846, will see their combined holdings cut to 7.6 per cent because they lack the funds to help to orchestrate the cash call themselves.

Mr Krishnan is the second-richest man in Malaysia, owns Maxis, the country’s largest mobile phone company, and holds 40 per cent of Astro All Asia Networks, its only pay television operator. He is expanding overseas and has been eyeing investments in Britain.

Astro considered a bid for SMG’s Virgin Radio, but it switched its attention to Johnston a few weeks ago, when a representative of Mr Krishnan approached the company about the possibility of investment at a time when the newspaper group was under serious financial pressure.

Tim Bowdler, the chief executive of Johnston Press, said: “The game plan here is simple. Advertising revenues are under pressure, the economy is looking difficult, we had too much debt on our balance sheet and needed to deal with that sooner rather than later.”

The emergency fundraising, which will be accomplished by a one-for-one rights issue raising £169 million plus a further £43 million of direct investment by Mr Krishnan, marks a sharp fall from grace for a company long considered the best run of Britain’s “big four” regional newspaper groups. Mr Krishan is also buying shares direct from the Johnston family and is taking up his rights in the cash call.

Under Mr Bowdler, Johnston acquired aggressively, with purchases of titles such as The Scotsman, at a time when his rivals, Trinity Mirror, Daily Mail and General Trust, and Gannett’s Newsquest were acting cautiously. At the same time, although margins remained the best in the industry, the company was making limited investment in digital media.

This year Johnston has been beset by worries that it would breach its banking covenants as the market softened. The shares, which began the year at 275p, closed yesterday at 115¼p down 15 per cent on the day. The new shares will be available at 53p, making 84.125p the theoretical price after the deal is done.

Figures released by Johnston yesterday showed how fast the regional newspaper advertising revenue was deteriorating as the British economy faltered. Total advertising was down 5.7 per cent in the 17 weeks to April 17, yet when the group last updated the market it said that the decline was 4.2 per cent in the period to March 5.

Johnston Press said that its borrowings were £700 million, which will fall to less than £500 million once the fundraising is completed. The publisher is keen to trim debt further, to about £400 million.

Mr Bowdler said that the extra capital would allow for an acceleration of the company’s digital strategy.

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