Newspaper Deal Market Regaining Strength: Look for a Slow Return in the Market for Newspapers, as Valuations Stay Low for Now
Murray, Phil, Editor & Publisher
SHORTLY AFTER BUYING A newspaper group in North Carolina from Cox Enterprises last year, Cooke Communications LLC Chairman John Kent Cooke told The Washington Post: "We are contrary."
That would seem to be an understatement at a time when the cascade of negative press for newspapers led many to begin writing obits for the industry, but Cooke has plenty of company at the contrarians' party. The three dailies in his North Carolina group were among 31 daily newspapers that changed hands in 2009, nearly twice the number that sold in the prior year.
Surprise! The newspaper deal market is alive and well.
To be sure, there are still significant hurdles to getting newspaper deals closed. Credit markets remain tight, making financing difficult. The most prolific newspaper buyers of the past decade are on the sidelines paying down debt. And advertising revenue continues to contract at most newspapers, albeit at a much slower rate of decline.
As a result, this environment often requires creativity in deal-making, with structures that may be different from transaction to transaction. Moreover, acquisition capital structures need more equity and possibly unconventional lending sources.
Yet attractive newspaper acquisition opportunities are bringing multiple prospective buyers to the table. And companies with the ability to fund acquisitions are taking advantage.
A new breed of buyers has emerged, led by such family-owned companies as Cooke Communications, with strong balance sheets.
The Seaton family of Manhattan, Kan., last year bought an attractive newspaper in Colorado that had no synergies with any of Seaton Newspapers' existing properties. Other family companies making acquisitions in 2009 included the Sheltons in Decatur, Ala., who bought a neighboring daily from the New York Times Co.; Southern Newspapers, headed by Lissa Walls Vahldiek; and the Pennsylvania-based Sample News Group.
Private equity also is getting back into the act again. In the past, increased activity by private equity firms in newspaper deals has been a leading indicator of a pickup in transaction volume following a recession-induced downturn.
Four large private equity firms have made newspaper acquisitions in the past year. For example, longtime newspaper executive Rich Connor, backed by HM Capital of Dallas, bought the Portland Press Herald/Maine Sunday Telegram and two other Maine dailies in one of 2009's largest deals. …