2005 Newspaper Deals Topped $3B

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By: E&P Staff

If the newspaper industry is hurting so badly, how come there’s such a hot market for dailies?

In 2005, a total of 111 daily newspapers changed hands in 23 transactions totaling $3.09 billion, according to Dirks, Van Essen & Murray, the newspaper merger-and-acquisition firm headquartered in Santa Fe, N.M.

By contrast, just 44 dailies sold in 2004 in deals totaling $918.1 million, according to the firm.

The year’s big numbers were fueled by one blockbuster deal — Lee Enterprises Inc.’s $1.46 billion purchase of Pulitzer Inc. — plus three other large transactions: Fortress Investment Group LLC’s purchase of Liberty Group Publishing that included 66 daily newspapers; Community Newspaper Holdings Inc.’s (CNHI) purchase of the New England cluster under the flagship Lawrence (Mass.) Eagle-Tribune; and the three-way deal between Gannett Co., Knight Ridder, and MediaNews Group Inc. that changed the ownership of several big metros.

“Although traditional media is somewhat out of favor on Wall Street, those buying newspapers in the private marketplace continue to see significant value in the industry’s strong hold on local news and information at the community level,” Phil Murray, senior vice president of Dirks, Van Essen & Murray, said in a statement.

The firm reported it was involved in the sale of 76 of the daily newspapers sold in 2005.

Last year’s purchase prices reflected multiples of cash flow that were at or near the peak levels of the late 1990s, Dirks, Van Essen Vice President James Oldershaw said.

“Strategic acquirers see real synergies in adding pieces to clusters of publishing operations,” Oldershaw said in a statement. “In addition, private equity has made significant investments in newspapers in recent years, aided by relatively high lending ratios. This has allowed the equity firms to pay market prices and still achieve their returns.”

The firm said it expects deal activity to “remain robust” in 2006.

Deal activity in the newspaper industry has been rebuilding back to the levels of the late 1990s since falling off dramatically in the 2001 recession, the firm said. It said deal activity routinely reached the $2 billion to $3 billion level in the late 1990s, peaking in the record year of 2000 at $14.25 billion.

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