Newspaper Values to Rise in '97
The following is an edited version of a report by Dirks, Van Essen & Associates
Daily newspaper values should rise for the fifth straight year in 1997 as acquisition activity remains strong.
Newspaper groups strong financial performance, supercharged by newsprint prices substantially below year-earlier levels, will fuel the continuation of the four-year recovery in newspaper values that started in 1993.
The climb in newspaper values since the recession of the early 1990s has brought prices to levels approaching those of the late 1980s.
The financial strength of buyers (particularly medium-sized groups), combined with the availability of capital at low interest rates, will continue to provide the demand for newspaper companies, especially those with strong franchises.
The supply will come from newspaper owners enticed by:
* Historically strong prices expressed as multiples of cash flow and revenues.
* Newspaper groups paring their portfolio of newspapers for strategic reasons pertaining to size or geographical location.
* The tax-saving expiration of the 10-year term required of companies that adopted Subchapter S status when tax laws were changed on Jan. 1, 1987.
Newspaper acquisition activity is off to a quick start in 1997. In January alone, 11 separate daily newspapers were announced.
The strong market for daily newspapers in 1996 resulted in a near-record number of properties being sold -- 118.
The activity almost matched the record year in 1986, when tax-law changes brought an unprecedented number of sellers to the market and 119 daily newspapers changed hands. Previously, the second highest number of daily newspapers sold in a single year was 105, which occurred in 1993, as the industry began to move out of a severe recession. In 1995, a total of 87 daily newspapers were sold. A sale is recorded in the year in which the deal is announced.
Daily newspaper transaction volume totaled nearly $2 billion in 1996. the fourth highest level ever recorded, the report noted. This compares with more than $3 billion in transactions the previous year. However, in 1995, a single transaction -- the newspaper portion of the Capital Cities/ABC sale to Disney -- represented approximately one-third of the total volume. There was no such billion-dollar "blockbuster" transaction in 1996. …