Several key financial players and newspaper operators have publicly expressed interest in buying, and are doing so privately as well.
“Everybody’s talking to everybody,” says one top executive of a major newspaper company.
Among those that have made recent acquisitions or have publicly said they are looking are the soon-to-be-spun-off Tribune Publishing Company, which recently bought some smaller papers around Baltimore and Hartford and said in a recent financial filing that it expects acquisitions to be “an important component of our business strategy”; News Corp., whose main man Rupert Murdoch was recently heard strongly hinting along these lines; and an under-the-radar owner of smaller newspapers, GateHouse Media, among others.
The main reason for all this is pretty simple: Newspapers, having crashed in value, are now cheap, have more or less stabilized, and are still throwing off lots of cash. More on this below.
Warren Buffett noticed this a couple of years ago and made a much celebrated foray into the market, though opinions differ on how well that deal is working out. More quietly, Halifax Media Group, backed by, among others, a unit of Stephens Inc., an investment bank based in Little Rock, Arkansas, has made a string of deals in recent years, including 16 papers from The New York Times Co. in 2012.
Meanwhile, Digital First Media, a combination of the old Journal Register Company and Dean Singleton’s Media News Group and one of the larger newspaper concerns in the country, laid off employees as part of a major cost cutting initiative, which is sometimes a prelude to a sale, and is the subject of an uncontradicted report by Ken Doctor that it’s massive portfolio is indeed going on the market.
Dallas Morning News owner A.H. Belo sold its Riverside, CA, paper and has the Providence Journal on the block, the sale of which could be announced any time now.
And so on.
Now, it’s important to keep some perspective. As Owen Van Essen, president of Dirks, Van Essen & Murray, a Santa Fe, NM, merger-and-acquisition firm specializing in newspapers, reminds me with a chart, any merger activity will not even remotely resemble the crazy days of the pre-crisis era, when credit was gushing as through a fire hose, prices were sky high, and deals were fast and furious.
Still, it’s as if the market has hit a giant “reset” button, and buyers are back on the market with a new rationale. “People just have different expectations for newspapers today,” Van Essen says. In this case, different means much lower profit and growth expectations.
GateHouse, whose parent company is now called New Media Investment Group Inc., has been the most explicit about its interest in the market. Its history gives a clue as to why newspapers might be in play now.
GateHouse was once a chain of more than 200 mostly community papers known as a Liberty Group Publishing, which in 2005 was scooped up by private equity giant Fortress Investment Group LLC, now a public traded owner of everything from railroads, to old folks homes, to Umami Burger.
The newspaper deal, as the WSJ recounted later, followed the classic private equity formula for slow-growing but still profitable industries: Add huge debt and pay investors a dividend using the cash flow. It didn’t work out. GateHouse ended in bankruptcy court within three years, the victim of unraveling newspaper finances and its own debt load, among other things.
But now it’s poised to start all over again. After entering bankruptcy and shedding debt (corporations, unlike students, get to do that), a newly reformed entity still controlled by Fortress began to buy up newspapers, even while it was still in bankruptcy—including a deal last September for the former Ottaway newspaper chain from News Corp., which includes the Times Herald-Record of Middletown, NY, and Massachusetts’s Cape Cod Times. And now it’s out of bankruptcy, its debt reduced, and spun off into a new public company, New Media, better known by its GateHouse unit.