Friday, March 20, 2009

San Diego deal pales next to Peoria price

The San Diego Union-Tribune probably sold for a fraction of the price fetched just two years ago by a group of papers its parent company peddled in places like Peoria.

When the sale of the Union-Tribune was announced this week, owner Copley Press did not disclose the terms offered by the buyer, Platinum Equities, a private-equity firm in Beverly Hills that specializes in distressed properties.

Noting that the pending deal includes 13.5 acres of choice real estate worth some $100 million, industry analysts believe the Union-Tribune is slated to change hands in the best case for a price between $100 million and $150 million. The Wall Street Journal quoted anonymous sources that said the price is only $50 million.

Thus, the range of possible prices for the paper would go from a low of $185 to a high of $550 for each of its 269,819 daily subscribers. By contrast, Copley in 2007 realized $1,576 per subscriber when it sold for $380 million a group of Midwestern papers with a collective circulation of 241,060.

The Midwestern properties, which were acquired by GateHouse Media, included the Peoria (IL) Journal Star, the Springfield (IL) Journal-Register, the Lincoln (IL) Courier, the Galesburg (IL) Register-Mail, the Canton (OH) Repository, the Massillon (OH) Independent and the New Philadelphia (OH) Times-Reporter.

7 Comments:

Anonymous Anonymous said...

Isn't this situation a breath of fresh air?

Finally a newspaper switches hands and goes to a new owner that will have a reasonable debt load.
Wouldn't it be great to see a fair chance for a new owner NOT to file bankrupcy due to poor buying decisions like the Trib Company less than 14 months later? Here's to the San Diego Union-Tribune team and the new operators for a successful transition and long prosperous life. Future SD readers and newspaper employees have a fighting chance!

6:40 PM  
Anonymous Anonymous said...

It sold for $50 million... period.. with some upside if certain numbers are met over the next few years.... so do not inflate the number... it sold for a song... it sold for "current real estate value".. with no value attributed to the newspaper.. which is the correct approach in today's value of newspaper companie... take a look at the values of public traded companies... trading for pennies..

6:42 PM  
Blogger tom said...

And get this: in the mid-90s Copley paid $340 million just for the Peoria and Galesburg papers (if memory serves) AND installed a new press in P-town at a cost of about $50 mil.

7:43 AM  
Anonymous yelvington said...

It's worth keeping in mind that the current value of any business is based on the anticipated amount of cash flow over time. Sometimes that anticipation gets out of whack and creates a pricing bubble. Copley bought Peoria when the bubble was growing. McClatchy bought Knight-Ridder just in time to see it pop.

Mid-size papers like Peoria (circulation 63,500 daily, 80,000 Sunday) operate at a smaller scale than San Diego (270,000/342,000). But for the last several years profit margins at mid-size papers have been much higher than at big metros -- some of which are posting big negative numbers.

Even today, even in this horrible economy, even with revenue numbers coming in 20-30 percent below last year's, papers in that mid-size circulation class are throwing off huge amounts of cash, and there's good reason to believe they will regain much of their former strength as the economy rebuilds.

So you could make a case right now for valuing some Peoria-size newspapers much higher than their rotting metro brethren.

I think there's way too much general negativity about the state of the newspaper industry, and probably too little about some specific metros.

8:44 AM  
OpenID sadbastards said...

Newsosaur,
Good detail. The Copley Midwest papers had double didget profit margins, more that "big oil" or Ebay.

That's why the were valued so highly. San Diego is a metro area filled with competition and is really just a suburb of LA.

San Diego real estate is the most valued piece of that failing newspaper. Great report. http://sadbastards.wordpress.com

9:37 AM  
Anonymous Mark said...

Some unsolicited advice for the U-T's new owners:

Sell all the paper's land, including as much of the headquarters building as possible. Keep only the printing presses and a floor or two for top management.

Then give each reporter and ad sales rep a cell phone and a laptop. Have them spend their time out in the community finding stories and calling on advertisers in person. Hold meetings via conference call. File stories from home, Starbucks or the public library.

This strategy will not only capture a lot of value for the new owners, it will also produce better news coverage and better serve advertisers.

8:03 AM  
Anonymous M@ said...

Apparently Mark has never worked at a newspaper. There's a reason a wall exists between advertising and reporting. Advertorial nightmares are already haunting me.

1:30 AM  

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