Mecom, the European newspaper group run by David Montgomery, is poised to sell its German newspapers for €165 million (£148 million), as it begins the process of cutting nearly £600 million of debts.

A disposal at that level will see Mecom sell the business for around ten times underlying earnings, despite the credit crunch, although it will make a loss in euro terms because it paid a little over €200 million to break into Germany through a series of transactions.

However, the fall in the value of sterling since the acquisitions means that it will roughly break even, when the deals are translated back into pounds. Mecom first bought into Germany in 2005, as part of a syndicate, and took control of the papers in 2007.

The buyer is M. DuMont Schauberg, the Cologne based publisher, which is the fourth largest newspaper group in the country. It owns the Koelner Stadt-Anzeiger and Express titles. If the talks conclude as anticipated, an announcement could come as son as today.

Mecom is hoping that the higher sale price will demonstrate that the value of newspapers remains healthy - more so than the market believes - and that the group will easily be able to trim its debts by about a third to ensure that it can maintain its core operations in Denmark, the Netherlands and Norway.

Germany contributed £8 million of underlying earnings in the first half of 2008, out of £81 million for the group, and the country is the second smallest of the five nations in which Mecom operates in, which also includes Poland.

The sale of Berliner Zeitung and the Hamburger Morgenpost titles, in Berlin and Hamburg respectively, will also rid the group of businesses whose journalists have had a difficult relationship with the company's management.

Mr Mongtomery's plan was to increase the profitabilty of the newspapers he acquired, introducing some of the management techniques used in the UK, where margins are much higher. That approached unsettled many of German journalists, who were frequently publicly critical of the Ulsterman, who is best known in Britain for his time running Mirror Group Newspapers during the 1990s.

Mecom declined to comment, although speculation about a deal is widespread in Germany.

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