The High Cost of Irrelevance

I predicted earlier this week that the Republic would be up for sale this year.  It's unlikely that the ownership rules that allow Gannett to own the Republic and Channel 12 will be relaxed and if Gannett is going to cut its losses, the Republic is the obvious choice. 

The market for newspapers is like the housing market--no one knows how far it has slipped until one sells down the street, and major newspapers don't sell everyday.  However, the newspaper industry was rocked by the sale of the Minneapolis Star Tribune.  The paper sold for half the price for which it was acquired a mere 8 years ago. 

Here's how Editor and Publisher covers the story. 

Early Wednesday, Goldman Sachs became one of the first newspaper industry analyst firms to analyze the shocking announcement of the pending sale of the Star Tribune of Minneapolis by McClatchy Co. to a private equity firm. In its heading, Goldman stated it plainly: "Minneapolis valuation a Bearish signal for newspaper industry."

While McClatchy will "generate a tax benefit of about $160 million," Goldman observes, it is also taking a hit on the sale price, having paid $1.2 billion for the paper in 1998, now selling it for $530 million.

"The substantial loss on the sale is a vivid reminder of the industry's declining fortunes over the last several years," Goldman declared. "While we are intrigued that a private equity firm is showing interest in the newspaper sector, the 7.4x estimated EV/EBITDA valuation is not a Bullish indicator for the sector given a current newspaper group average 2007E valuation of about 8.7x."

Here's an interesting letter

Greg,

I saw that you pointed out gannett's ownership of ch12 on EP.  Interesting part of that is that I know someone at the newspaper who says this year's election coverage was lackluster at best.  While there isn't a formal policy or anything, my source at the Republic is under the impression that someone with Gannett decided weak political coverage in the newspaper would sell ad time on Ch12's airwaves.  After all, politicians have to go somewhere to get there message out. 

Comments

[Ray G]

That sounds like shaky advice, if for no other reason, Ch12 is only one station.

[Ray G]

That sounds like shaky advice, if for no other reason, Ch12 is only one station.