Lender-Owned Companies Vault into Second Place
A new breed of "unintentional" owners has moved into the newspaper industry. Banks, other lenders and distressed debt hedge funds have gained ownership in major newspaper companies through recent bankruptcy proceedings.
But just how big is their stake in the industry?
This group of owners now controls nearly one-fifth of the industry’s revenue. This represents the second largest ownership segment in the U.S. in terms of revenue, trailing only the publicly traded newspaper companies, according to a study by Dirks, Van Essen & Murray.
These lender-owned newspaper companies own a much smaller chunk of all of the daily newspapers in the country – a paltry 11.2%. However, because their newspapers tend to be much larger than average, their share of revenue is considerably higher.
The public companies still rule the roost, controlling some 44.2% of the industry’s revenue, even though their ranks have been thinned in recent years by the loss of such notable companies as Tribune Co. and Journal Register Co.
Lender-owned companies (which include those still in bankruptcy but expected to emerge soon) account for 18.1% of industry revenue. Traditional privately held corporations rank third in our study at 18.0%. Private equity owners have fallen to sixth place.
For the purpose of this study, DV&M divided the ownership ranks of the newspaper industry into several segments, based on our judgment of type and style of ownership
We used our proprietary newspaper database, which estimates newspaper revenue by market, and publicly reported results to generate annual revenue estimates for more than 350 different companies (or the newspaper components of these companies). In addition to revenue, we determined the number of daily newspapers owned by each company. Each segment and the result of the study are described in detail below.
Public Companies 44.2% of Revenue
24.8% of Daily Newspapers
Stalwarts such as Gannett Company, Inc., the New York Times Co. and the McClatchy Co. still represent the largest segment of the industry.
However, the number of public companies has shrunk over the past decade for a variety of reasons: Some were acquired; others went private; and still others joined the list of lender-owned concerns through bankruptcy proceedings.
Moreover, the public companies have not been acquisition-minded recently. The last public newspaper company to buy a daily newspaper was the New York Times’ acquisition of the Winter Haven (FL) New Chief in early 2008.
Cablevision’s acquisition of Newsday also occurred in 2008. Revenue from a newspaper owned by any public company is included in this category. Thus, Newsday is part of this segment, even though Cablevision doesn’t qualify as a public “newspaper” company.
Lender-Owned Companies 18.1% of Revenue
11.2% of Daily Newspapers
Some of the largest names in the newspaper industry have moved into this segment over the past 12 months. These include MediaNews Group, Freedom Communications, Journal Register Co. and Tribune Co. (Tribune is included here even though it is still in the midst of its bankruptcy proceedings.)
These companies have restructured their balance sheets and transferred ownership control to lenders such as JP Morgan Chase & Co. and hedge funds that include Angelo Gordon & Co. and Alden Global Capital. This segment is bound to undergo considerable change in the coming years as these owners seek to exit their investments.
Corporate Owners (Privately Held) – Groups
18.0% of Revenue
21.1% of Daily Newspapers
This segment captures privately held companies that operate newspaper groups, often as part of larger corporations. For example, newspapers owned by the Hearst Corp., Cox Enterprises and Community Newspaper Holdings, Inc. are included here.
Even though families often are important parts of the ownership structures of these corporations, we classify them differently from the family groups described below. Some companies that once were major components of this segment, such as MediaNews Group, are now part of the lender-owned segment.
Prior to the economic downturn and credit crisis in 2008, this segment had been the most active buyer of daily newspapers.
7.5% of Revenue
21.4% of Daily Newspapers
Family-owned newspaper companies continue to be an important segment of ownership. This category generally consists of smaller companies whose primary focus is newspapers. Usually the family will live in the flagship newspaper’s market.
Rust Communications, based in Cape Girardeau, Missouri; Southern Newspapers in Houston; and Walter Hussman’s Wehco Media in Little Rock, Arkansas are among the companies in this segment. (Wehco also owns cable television properties.)
This category of owners has been active in the acquisition market over the past two years as many public and corporate newspaper companies struggled with balance sheet issues. In 2009, nearly half of all daily newspaper deals were consummated by family-owned newspaper companies. The Seaton family, Cooke family and Rust family all bought dailies last year.
These companies tend to own small daily newspapers, but they own a lot of them. The percentage of dailies they own is the second highest in the industry.
6.5% of Revenue
13.8% of Daily Newspapers
Although the number of independent newspaper owners has steadily declined over the years, these local owners still control nearly 200 daily newspapers. An independent is defined as an individual or family that owns a single daily newspaper, often for more than one generation, and usually lives in the market.
Independent owners represent a much smaller percentage of the sellers than they did a decade ago. This segment also can lose members as they become acquirers. For example, the Shelton family bought a neighboring daily newspaper operation from the New York Times Co. in 2009 and is now classified as a family group.
Private Equity Owners
2.3% of Revenue
3.7% of Daily Newspapers
Private equity ownership in the newspaper industry tends to ebb and flow.
In past years, private equity firms, which make investments on behalf of wealthy individuals and institutions, have owned some large newspaper companies. For example, private equity owners built 21st Century Newspapers in Michigan before selling it in 2004 for $415 million.
Although they command a relatively small share of the industry today, investment has been on the rise. In 2009, Stephens Capital Partners, American Securities, HM Capital Partners and Platinum Equity all made daily newspaper acquisitions.
Corporate Owners (Privately Held) – Single Newspaper
1.8% of Revenue
0.4% of Daily Newspapers
A handful of individual newspapers are owned by large corporations whose primary business is something else. An example is the New York Daily News, whose owner Mort Zuckerman is a real estate tycoon and magazine owner.
Also, Champion Industries bought the Huntington (WV) Herald-Dispatch in 2007. Huntington is the hometown newspaper of the corporate headquarters.
Non-Profit Owners 1.1% of Revenue 0.4% of Daily Newspapers This is another category with just a few newspapers. The most notable member of this group is the St. Petersburg (FL) Times, which is owned by the Poynter Institute. Nelson Poynter willed his controlling interest in the newspaper to his educational institute in 1978.
Entrepreneurs 0.5% of Revenue 3.3% of Daily Newspapers Entrepreneurial types had a hard time buying daily newspapers when the large companies were making most of the deals. Not anymore.
Over the past 12 months, a number of individuals have taken advantage of opportunities. Randy Miller, through a new company, bought Freedom’s operations in suburban Phoenix earlier this year. Last year, Michael Schroeder stepped in buy two daily newspapers from Journal Register Co. in Bristol and New Britain, Connecticut.