It would be great if the Bryan Foundation would lead a non-profit group in buying the News & Record.

The local monopoly daily seems to be for sale.

Given the media environment, it would probably be on sale, too.

Why Bryan?

It's got lots of money and could afford to accept good but non-monopoly-era returns. It has an agenda to help Guilford County, and local ownership would be a good thing for this region, as would a newspaper focused on journalism and the chance to become the dominant media brand in this area.

Less good but more likely: a buyout group or national chain buys it, loads it with debt, bleeds it dry, and leaves it worse than it was.

Comments

[Jonathan Jones]

A purchase by a non-profit would be ideal, no doubt. So how do we convince the Bryan Foundation to take a look at it?

But a purchase by another chain would not necessarily be terrible. It depends on which chain, really. I'm sure Media General would be interested, and that's something I'm not sure would be so great. Gannett is unlikely for Greensboro -- maybe the other Landmark papers -- unless it intends to dump News 2 or gamble on the new cross ownership rules being expanded further. A purchase by McClatchy wouldn't be so bad for Greensboro -- it didn't wreak havoc on the Knight Ridder papers they purchased -- but I doubt its ready to go on another buying spree. Not sure which other chains might be interested.

God help the paper, and really the community at large, if some company were to overpay the way Paxton did for the Durham paper a few years back.

A friend of mine at another Landmark paper says the folks there are talking this morning about how they can put together an employee-ownership package and make a run at it. One heck of a longshot, but not a bad idea either. I hope they get far enough along to get serious.

[Jeffrey Sykes]

With newspaper stocks trending down, and Media General trading below 20 this morning, non-profit may be the only thing that gives journalism a fighting chance.

[Bubba]

The assumption here is that the papers will be sold off piecemeal.

I would imagine that Weather Channel, probably the most valuable commodity, will maintain most of the focus of any initial sale. Following that, the Print assets will be then offered far and wide as a package.

Any individual sell-offs would come only after package deals are put together.

[Ed Cone]

Your assumption about the Weather Channel mirrors the headline and content of the linked article, Bob. Well done!

The article also points out that daily papers aren't doing as well as community papers. Landmark may package them separately.

[Spag]

I vote for Rupert Murdoch.

[Jim Rosenberg]

Option.

[Roch101]

Not trying to stuff your interesting suggestion back in a box, but are there any other dailies owned by non-profits?

What do you think the price would be? $40M or so?

[Bubba]

"Your assumption about the Weather Channel mirrors the headline and content of the linked article, Bob. Well done!"

Read again for comprehension, Smart Ass:

"I would imagine that Weather Channel, probably the most valuable commodity, ****will maintain most of the focus**** of any initial sale."

That directly relates to the issue of any sell off of newspapers.

[Kirk Ross]

Greensboro is probably one of the few places where a non-profit metro daily could make it, but there aren't a lot of models out there for such a thing.
One alternative would be a locally-owned for profit (either employee-owned or owned by a group of local investors or a hybrid) whose journalism mission is supported/supplemented by a private foundation. This is the model that The Nation has used successfully.

[Roch101]

Did I say $40M? I was kidding. You know that, right?

McClatchy bought the News & Observer in 1995 for $373M.

At 5 to 7 times annual sales, the price of the N&R would be about $280M - $392M.

[Jonathan Jones]

Roch,

There are a few non-profit owned newspapers out there. The largest and most renowned is the St Petersburg Times, which is owned by the Poynter Institute.

The Anniston Star in Alabama and the Union Leader in New Hampshire are also owned by charitable trusts.

[Tom Lassiter]

Random thoughts: Those layoffs way back in '07 were mere coincidence. Should I wash & wax my car before it goes on Craigslist?

[Margaret Banks]

Personally, I'm hoping Percy Walker will take an interest.

[Ed Cone]

Roch, the relevant number would seem to be a multiple of cash flow, not revenue, and the sale price of the N&O included some other assets. From the article you cited on the sale of the N&O:

"McClatchy will pay $250 million for the stock of the company and will assume $123 million in debt. Included in the sale are seven smaller publications in North Carolina owned by the company...With revenue of $107 million last year, the News & Observer company...Analysts said that McClatchy appeared to have paid generously, about 10 times what they estimated was the company's cash flow. Many publicly held newspaper companies trade at about seven times cash flow."

As noted here, N&R sales were $62 million in a recent year. Circulation has been more or less flat, newsprint costs are high, the ad market is challenging; meanwhile, personnel costs have been reduced. JR has said that profit margins not at the level of some public companies...so, choose a number for cash flow, it's a fraction of revenues, and remember that those mid-'90s multiples may not apply anymore.

[John Robinson]

A couple answers: The weather companies are a big driver in this. Larger papers can be sold separately, except for our community division which would be a package deal.

The Bryan Foundation is an interesting idea -- and only speaking for myself -- not necessarily a good one, unless such a deal is structured with some high walls in place. I base that on my understanding of journalistic principles and my experience with stories that Bryan Foundation reps want us to pursue and want us to ignore. Their idea of news and traditional journalistic principles conflict more often than you might think.

[Anonymous]

The Durham Herald-Sun supposedly was sold to Paxton Communications for around $120 million and it is a smaller newspaper. In comparing the price to what the News & Observer sold for, the News & Record does publish other titles other than its own main daily but not as many larger community newspapers as the News & Observer does. Given this and the N&R revenue, I think the price tag for the News & Record would be around $180 to 200 million.

Also, a couple of observations: hope that Paxson does not buy the N&R. After seeing what they did to the Durham Herald staff (and their website) and how morale is currently at the High Point Enterprise, it would not be a good thing.

In addition, I would like to postulate another theory -- that Landmark is selling the Weather Channel so that it can actually hold onto the newspapers and not have to sell them. It is really more of a newspaper company anyway and the billions from the sale of the Weather Channel would secure the newspaper operations for years to come.

[Brad Krantz]

It's Hammer Time! The Eleven County News and Rhino Record!

Local Ownership...

Fire all those damn liberals like that Rosemary Clooney columnist chick and Ed Kone... Charles Davenport Rules and Uncle Orson Bean can review every damn thing EVER!

[Roch101]

Jonathan,

Thanks for the info.

Ed,

Thanks for the info. I was looking for a bottom line number on the N&O sale and missed that it included other properties.

According to this, 2007 sales for the N&R were $56.2M, if accurate, a decline over the previous year you cited.

[Ed Cone]

Correction: circulation has taken a dip this year, a pretty sharp one on weekdays.

The Paxton purchase of the Herald-Sun is an uncomfirmed number, and one that greatly exceeds pre-sale estimates of the paper's value.

Roch: note that you were using the wrong number to multiply, too -- it's cash flow, not revenues. So the multiple on the N&R would be on a fraction of that $56.2 million you cite.

[Roch101]

You know what would be cool? N&R ownership in the Green Bay Packers model.

[Anonymous]

Ed, in every newspaper sale that I have ever seen, it is not a multiple of cash flow -- it is typically two to three times revenue, with the cash flow being one of the factors (among many including declining circulation) as to what the final multiplier will be.

Go ask W.B. Grimes if you want to check that out.

In regards to the Herald-Sun sale, the $120 million sum is indeed an unconfirmed number, but one that was widely circulated among those in Durham that actually worked for the newspaper. It does seem high for that paper, but so did the McClatchey price for the Knight Ridder acquisition considering the general state of newspapers.

[Ed Cone]

The cash flow thing came from sources quoted in the Times article about the sale of the N&0.

Using a multiple of revenue to estimate the sale price is fine, as long as you don't use the cash flow formula (roughly 7x) to do it. The N&O deal was more like 3.5 x revenue.

In general, I think earnings/cash flow provides better estimates of the value of an enterprise than revenue, because the revenue # can hide a lot of costs, while cash flow relative to revenue can tell you more about the actual health of the business.

[max]

I think I'll give Jim Melvin my house, my car and my dog too, and my wife, if he wants her. Father knows best.

[Bubba]

"In addition, I would like to postulate another theory -- that Landmark is selling the Weather Channel so that it can actually hold onto the newspapers and not have to sell them. It is really more of a newspaper company anyway and the billions from the sale of the Weather Channel would secure the newspaper operations for years to come."

Thank you.

[Ed Cone]

So -- they want to sell their largest and most profitable business, the one with the best prospects for the future, the one that long ago redefined the company, so they can hang onto their smallest and most troubled business?

Not sure where that leaves the middle tier of operations, the community papers, but overall it makes sense to me!

[Bubba]

Selling an asset at the top of it's value curve makes sense, especially if said asset is not essential to growth in the future direction the company intends to travel.

[Ed Cone]

That is true. Not sure, though, that Weather Channel and related properties are at the top of the curve.

And there is no indication, including remarks from ownership about the sale, that the company wants to remain in the daily newspaper business. Certainly nothing about the recent history of the N&R bespeaks any special interest by ownership in the field.

Maybe the owners really do want to cash out and then reinvigorate and reinvent their original brands. That would be a lot better for Greensboro and its daily paper than many other options.

Or maybe they just want to cash out.

[Anonymous]

In regards to my theory, Bubba's agreement notwithstanding (sorry Bubba), if you look at Landmark's history, it is very much a family owned newspaper company. They've made a lot of money off of the Weather Channel, but I think first and foremost they consider themselves newspaper publishers.

Although I'm not necessarily privy to the inside decisions at Landmark, since they are privately owned and if they sell the Weather Channel media properties then wouldn't necessarily have to sell the newspapers. This doesn't mean they are completely altruistic and won't ever sell the papers.

But, if they get $5 billion for the Weather Channel, how much more do they need?

[Ed Cone]

I'd rather own a newspaper than a weather service, especially if I had an extra few billion to play with.

This article does not make the sale of the dailies sound like a foregone conclusion, but it's clearly on the table.

Frank Batten Jr.: "I'm very optimistic that this is the right thing for our shareholders and that all of our businesses will prosper, grow and do well under new ownership." [emphasis added]

There are a lot of shareholders involved. Heirs frequently want or need cash more than they want or need grandpa's business (famous example: the sale of Rockefeller Center).

It's hard to imagine the shareholders as a group keeping the worst business of the bunch, but perhaps a cash rich individual or group might do so. As noted previously, there would be many worse options for GSO.

[Kehaar]

In regards to the numbers: buyouts are typically a multiple of EBIT or EBITDA, earnings before interest and taxes (and debt and amortization).

[Ed Cone]

Many people (including me, in casual conversation) use EBITDA and cash flow interchangeably. Motley Fool: "Cash flow is normally defined as earnings before interest, taxes, depreciation and amortization (EBITDA)."

Forbes Investopedia: "Unfortunately, however, EBITDA is often used as a measure of cash flow, which is a very dangerous and misleading thing to do because there is a significant difference between the two."

The old NYT article cited above indicates that newspapers are valued according to cash flow. As noted in a previous comment, revenue is not always a reliable metric for valuation. Back when I used to spend a fair amount of time estimating the value of companies, revenue multiples were not part of our formula.