03-31-07 | Printable Version

Who is Macquarie and Why Do They Like Small Market Newspapers

 What is Macquarie Media Group?

Macquarie Media Group (ASX: MMG), a publicly traded investment fund listed on the Australian Stock Exchange, has the objective of acquiring, owning and managing a portfolio of media businesses globally.

The cornerstone of MMG’s strategy continues to be investing in and driving the performance of a broad range of media businesses with strong market positions, stable earnings and potential for growth. Managed by the Macquarie Group, MMG currently has a market capitalization of approximately US$785 million, with investments in cable, radio, TV and community newspapers in Australia, Taiwan and the United States.

Based on consensus views of brokers, MMG currently pays an annualized dividend distribution of approximately 10%.

How Is It Related to Macquarie Bank?

MMG is a fund managed by the Macquarie Group (Macquarie), a diversified international provider of financial and investment banking services.

Macquarie includes Macquarie Bank Limited, the leading Australian investment bank, which is listed on the Australian Stock Exchange with a market capitalization of US $15 billion.

In addition to providing a full range of investment banking services, Macquarie operates a global specialist funds management business in infrastructure and adjacent sectors, with over US$37 billion of equity under management globally.

Through its various listed and unlisted funds, Macquarie has investments across a range of asset classes including transportation infrastructure (e.g. tollroads and airports), utilities, ports and social infrastructure, as well as telecommunications and media assets.

Why is MMG interested in the US newspaper industry? MMG is looking to provide its investors with access to high quality media assets, which display some or all of the following characteristics – strong market positions, stable earnings and potential for growth.

MMG has identified that community newspaper businesses meet many of its investment criteria. MMG was attracted to American Consolidated Media (ACM), and the community newspaper sector more generally, as its business model is predominantly driven by its integral position in its local communities.

These papers are key and long-standing members of their communities and provide the essential function of news delivery and advertising services to its local populous, including businesses.

Does MMG Want to Buy More U.S. Newspapers?

The acquisition of ACM is part of a broader strategy to acquire and grow a portfolio of community newspaper businesses in the United States.

MMG and ACM believe there is the opportunity to generate significant operating efficiencies through a consolidation of these businesses led by professional and experienced management.

The opportunity has many parallels to the strategy MMG successfully implemented in the regional radio market in Australia. MMG would like to see its investments in community newspapers grow to be a greater proportion of its existing total equity portfolio of US$785 million, and intends to be very active in the acquisitions area on a highly selective and disciplined basis.

Are Certain Segments More Attractive to MMG?

MMG and ACM are attracted to businesses such as newspapers that provide essential services to their local communities; MMG believes that this critical role makes it difficult to erode their market position.

MMG also is looking for opportunities in attractive regions of the United States which have strong household and economic growth profiles.