The Year of the Big Deal: Newspaper sales activity reaches levels not seen since the start of the recession

Big transactions returned in 2011.

After a couple of years in which individual, small-market newspaper deals dominated the industry’s M&A world, several significant groups changed hands last year.

The resurgent activity pushed the number of daily newspapers sold in 2011 to its highest level since 2007 and one of the highest over the past decade.

Among the group transactions closed and announced in 2011 were the sale of the New York Times regional newspaper group (14 dailies), the former Brown Publishing newspapers in Ohio (14 dailies), Journal Register Co. (20 dailies), the Omaha World-Herald Co. (7 dailies), and the Sun-Times Media Group (8 dailies).

By the Numbers

In total, 71 daily newspapers were sold last year in 11 transactions worth $788.75 million.

That represented the most dailies sold in a year since the record-setting year of 2007, when 91 daily newspapers sold in transactions that totaled more than $20 billion.  Only two other years in the past decade saw more than 70 dailies change hands.

Buyers included some of the titans of the investing world.  In addition to Warren Buffett and Warren Stephens in the fourth quarter, Phil Anschutz bought the Daily Oklahoman in Oklahoma City as part of a larger transaction.

Local business leaders came to the plate to acquire hometown newspapers in San Diego and Chicago.

And some longtime publishers took advantage of opportunities to expand their holdings.  These included Dispatch Printing Co. in Columbus, Ohio; ECM Publishers in Minnesota; Osteen Publishing in South Carolina; David Black; Dean Singleton’s MediaNews Group; and Larry Perrotto’s Community Media Group.

Deal Market Outlook

The advertising climate for newspapers remained challenging in 2011.  After some encouraging signs early in the year, fortunes sank in the summer months.  Although there was some cause for optimism at year-end, most publishers are expecting modest declines in ad revenue again in 2012.

In addition, the lending environment continues to be difficult for financing newspaper transactions.

A loosening of cross-ownership rules, barring the ownership of daily newspapers, television stations or radio stations in the same market without a waiver, could spur some additional newspaper transaction activity in 2012.

An improving economy also could bolster the operating performance of newspapers this year, leading to more buyer interest.

However, our view is that the deal market will continue to be steady in 2012, but not spectacular.