The appointment will come as a surprise to the industry, where there has been no inkling of such a move. The appointment sees Graf step down earlier than expected. He had been set to go in the summer of 2003, after announcing he was stepping down earlier this year after the expensive relaunch and price war campaign for the Daily Mirror.
The move for Bailey, 40, is a return to the world of newspapers, having joined IPC in 1989 after stints on The Guardian and The Independent.
Bailey took over as chief executive of IPC in 1999, succeeding Mike Matthew who retired and took up the non-executive position of deputy chairman.
Her appointment was announced today by Trinity Mirror chairman Sir Victor Blank, who led the search for a successor for Graf, the former chief executive of regional newspaper group Trinity before its merger with Mirror Group newspapers.
During her time at IPC, Bailey has overseen the group's sale to AOL Time Warner. She led the negotiations, which resulted in the sale of the group and its merger into Time Inc in July 2001 for £1.15bn.
According to Bailey: "The chief executive role at Trinity Mirror is one of the key positions in UK media. Trinity Mirror is an ambitious and successful company with strong businesses, a clear growth strategy and enormous opportunities for further development. I'm absolutely thrilled at the prospect of leading the country's biggest newspaper publisher, and I look forward to building on the strength of some of the most powerful brands in national and regional newspapers."
The news comes as a blow to Time Inc and Michael Pepe, president of Time Inc International, expressed his disappointment at the move.
"I am disappointed to be losing Sly as the chief executive of IPC Media, but fully appreciate the huge opportunity she has been presented with at Trinity Mirror. Together with the IPC board, Sly has grown IPC into one of the most formidable publishing operations in the UK, developing it as a media business for the future and ultimately achieving the biggest-ever transatlantic media deal," he said.
A spokesman for IPC said a successor to Bailey will be announced early next year. In the interim, the IPC board will report directly to Pepe.
Lorna Tilbian a media analyst at Numis, said: "I think she's undoubtedly won her spurs in consumer magazines, but lacks national newspaper experience. But, having said that, she's a sharp and commercial business woman, which is probably the next best thing to an ex-news executive!"
When she first took over as chief executive at IPC, Bailey's role was initially to prepare it for a £1bn stock market flotation within two years. However, as the market faltered, this move was scuppered in favour of a trade sale by its owners, venture capitalists Cinven.
Bailey began her career in 1984 at The Guardian and, after this, moved to The Independent in 1987. She joined IPC as classified sales controller and in 1994 moved up to group ad sales director of the TV listings and women's weeklies divisions, recently revamped as IPC tx and IPC Connect.
In 1997, she became managing director of IPC tx and is credited with arresting the rate of decline of TV Times' circulation from 10%, when she took over, to 1% in the latest ABCs.
Bailey, who is highly respected within the media industry, joins a growing group of women heading up top UK media companies, alongside Majorie Scardino at Pearson and Carolyn McCall at Guardian Newspapers.
Sir Victor said: "The appointment of Sly is tremendous for Trinity Mirror. She has a proven track record in building businesses and brands, excellent media credentials and will bring extra drive and vigour to our national and regional newspapers. She joins a quality team in the process of re-invigorating the Trinity Mirror businesses. We are very much looking forward to having her as part of the team and warmly welcome her to the group."
She joins Trinity Mirror at difficult time for the group. Despite a relaunch, the Daily Mirror has not seen a dramatic increase in sales and investors have been calling on Sir Victor to sell the paper off. However, this move has been resisted and insiders believe it is unlikely to happen.
In July, Trinity Mirror reported a 4.6% fall in profits, and advertising revenues on its national newspapers, which also include The People and the Sunday Mirror, were down 8%. Interim operating profits in the six months to June 30 fell to £95.9m, down from £100.5m last year, as the group invested £6.5m in marketing, most of which is thought to have been spent on its costly price-cutting war with The Sun.
In the ABCs for October, the Daily Mirror added 2.53% to its circulation, bringing its average circulation for November to 2,148,058. The Sun fell 1.97% to 3,541,198 and mid-market rival The Daily Mail lost 0.68% to record a circulation of 2,420,301.
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