Year in review:
Deal market at post-recession high
The newspaper deal market continued to be brisk in 2012, as several new companies became significant players in the industry through acquisition.
The activity resulted in new post-recession highs in terms of the number of dailies changing hands and the number of separate transactions involving daily newspapers.
The big names who entered the fray in 2011, including Warren Stephens, Warren Buffett and Phil Anschutz, remained acquisition-minded in 2012 and contributed to the increased deal volume.
Versa Capital Management, which made its first newspaper purchase in 2011, built a new company called Civitas Media in 2012 with 35 dailies that cracked the top 10 in terms of daily newspapers owned.
Most of the sellers were group owners. Just 20% of the daily transactions involved independently owned newspapers.
Looking forward into 2013, we expect the deal flow to remain strong. Although the environment for financing transactions is still challenging, many of the buyers entering the marketplace are bringing financial strength that enhances their ability to close.
By the Numbers
In total, 84 daily newspapers were sold last year in 25 transactions worth $642.83 million.
Those totals were up from 2011, when 71 dailies sold in just 11 separate transactions. Dollar volume was slightly higher in 2011 at $788.75. Both years were the most active since the record-setting year of 2007, just prior to the national recession.
The two largest transactions of 2012 involved the breakups of two venerable newspaper companies.
A unit of Buffett’s Berkshire Hathaway bought most of the newspapers owned by Richmond, Va.-based Media General. Media General’s Tampa (FL) Tribune and related publications were sold separately to a private equity group.
In addition, Freedom Communications sold all of its newspapers in a series of transactions.
An investor group led by Aaron Kushner bought the newspapers located in the west, including the Orange County Register, and retained the Freedom Communications name.
Previously, Freedom had sold its newspapers in Florida and North Carolina to Stephens’ Halifax Media Group, its Texas newspapers to a new company led by Jeremy Halbreich and its Midwest newspapers to Versa. Versa formed Civitas Media after taking over Heartland Publications later in the year.
The field of buyers in 2012 also consisted of a number of longtime privately held newspaper companies that took advantage of opportunities. Among these were Ogden Newspapers, Jeff Brown’s Home News Enterprises, Sample News Group and Boone Newspapers.
Additionally, local interests bought newspapers in Santa Rosa, California; Lawton, Oklahoma; Maine; and Philadelphia.
Print advertising revenue remains soft in many parts of the country, but economic improvements have contributed to strengthening trends in some areas. There were some encouraging signs at year-end. Even so, most publishers are expecting modest declines in print ad revenue in 2013.
At this point, we expect the level of deal activity in 2013 to be consistent with the prior two years.
Some factors could drive the market higher: easing of credit markets for newspaper transactions; stronger regional and national economic activity; and improvements in the ability of newspapers to drive revenue from digital activities, circulation and non-traditional sources.
Any of these positive movements likely would bring more buyers into the market and prompt more owners to consider divestitures.