12-31-07 | Printable Version

Year-End 2007

Sales of Tribune, Dow Jones Fuel Largest M&A Year

Sales of daily newspapers exceeded $20 billion in 2007, blowing away the old record of $14.2 billion set in 2000.

The big number last year was driven in large part by the sale of two venerable public companies – Tribune Co. and Dow Jones.

However, the underlying deal volume remained strong, as the focus on small and mid-sized newspaper markets kept the market active.

GateHouse Media, which went public in late 2006 with a buildup strategy around “hyperlocal” content, and upstart American Consolidated Media were among the most acquisitive companies in 2007.

Both GateHouse and American Consolidated, which is part of a publicly traded company based in Australia, offer investors a high dividend based on the relatively steady cash flow generated by community dailies and weeklies.

In addition, several family-owned companies, including Paxton Media Group, Times-Shamrock Communications and Brown Publishing grew publishing clusters with strategic acquisitions.

Looking ahead to 2008, we expect deal volume to come off the heady pace of recent years due to a cooling economy and uncertainty in the credit markets.

By The Numbers

For the record, there were a total of 30 transactions involving 91 daily newspapers announced in 2007.

The total transactional value of more than $20 billion followed an active 2006, in which just under $10 billion in daily newspaper transactions were tallied, the second highest total for the industry at that time behind 2000.

McClatchy was the driving force in 2006, with its acquisition of Knight Ridder and subsequent sale of several Knight Ridder newspapers. In 2000, the big transactions included the sales of Times Mirror (to Tribune), Thomson Newspapers’ U.S. holdings and Central Newspapers.

The Big Ones

In the largest transaction of 2007, real estate investor Sam Zell led the privatization of Tribune Co. in a deal that valued the equity of the company at $8.2 billion plus the assumption of debt.

The second mega-deal of the year was News Corp.’s acquisition of Dow Jones for $5.0 billion plus the assumption of debt. Combined these two deals accounted for more than $18 billion of the year’s volume.

GateHouse had a busy year, buying 25 dailies in three significant transactions. GateHouse acquired four dailies from Gannett, seven from Copley Press and 14 from Morris Communications.

American Consolidated was a new entrant on the acquisition scene. Early in 2007 Jeremy Halbreich’s Texas-based newspaper company was bought by Macquarie Media Group, an Australian public company that also owns small-market media worldwide.

Macquarie/American Consolidated then grew through several additional acquisitions in the U.S., including groups of community dailies and weeklies in the Upper Midwest, Maryland’s Eastern Shore and southern Ohio. In total, Macquarie bought 14 dailies, counting the initial platform.

Cluster Building

Meanwhile, Paxton added more dailies in Indiana in three individual transactions. The dailies in Huntington and Marion in northeastern Indiana augmented the company’s presence there. The La Porte Herald-Argus gives Paxton a larger footprint in northern Indiana and southern Michigan.

The Lynett family’s Times-Shamrock added the Hazelton Standard-Speaker near their home base in Scranton, Pennsylvania.

On the other side of the state, Tribune-Review Publishing bought the McKeesport Daily News to expand its suburban Pittsburgh group. Brown Publishing shed some newspapers in southern Ohio, but acquired a cluster in the northern part of the state.

Outlook

Absent of another blockbuster deal in 2008, we expect the deal volume to return to more normal levels in the coming year.

The strength of the U.S. economy could impact deal flow in 2008. Activity tends to fall during slow economic times. The other wild card is the state of the credit markets.