Dow Jones Sells Six Ottaway Papers To CNHI

By: E&P Staff

Dow Jones & Co. agreed to sell six of its Ottaway community newspapers to Community Newspaper Holdings Inc. (CNHI) for $282.5 million in cash, the company announced late Friday.

Dow Jones said the sale price was 11.3 times EBITDA (earnings before interest, taxes, depreciation, and amortization).

After-tax proceeds will be approximately $268 million, Dow Jones said. The proceeds will be used to pay down debt and fund the recently announced Factiva acquisition.

“This sale and the pending acquisition of Factiva are the latest examples of our commitment to transform Dow Jones from a company heavily dependent on print publishing revenue to a more diversified company capable of meeting the needs of its customers across all consumer and enterprise media channels, whether print, online, mobile or otherwise,” Dow Jones CEO Rich Zannino said in a prepared statement. “By selling these papers for more than 11 times EBITDA and buying the remaining 50% of Factiva for an effective price after tax benefits and cost synergies of about 4 times EBITDA, we are efficiently redeploying capital from print to faster growing digital publishing.”

Zannino’s statement also suggested Dow Jones is finished selling off newspapers: ” “Our remaining local media properties generate strong financial returns and operate in attractive markets, and they will support the Dow Jones transformation as they extend their strong local franchises from newspapers to other forms of community media, especially the Internet, where advertising revenues have been up nearly 50% this year at these properties.”

The follow six papers will be sold to CNHI: the News-Times of Danbury, Conn.; The Daily Star of Oneonta, N.Y.; the Press-Republican of Plattsburgh, N.Y.; the Santa Cruz (Calif.) Sentinel; The Daily Item of Sunbury, Pa.; and the Traverse City (Mich.) Record-Eagle (Traverse City, Mich.).

During the bidding process, the Ottaway papers were visited by executives from MediaNews Group; GateHouse Media; and Journal Register Co., in addition to CNHI.

After the transaction, Dow Jones’ Local Media Group will consist of eight daily and 15 weekly newspapers in seven states with combined daily print circulation of 282,000, Sunday print circulation of 316,000, and online average daily unique visitors of 119,000.

The community papers, which in 2006 contributed about 19% of Dow Jones total revenue, will likely contribute 14% next year, the company said.

Dow Jones said it will receive $276.1 million of the $282.5 million purchase price upon closing, which is expected to occur in the fourth quarter of 2006. The balance of the purchase price will be paid upon transfer of real property, “subject to satisfaction of environmental conditions, in later periods,” the company added.

The six papers will have an estimated combined revenue of $96.3 million; operating income of $22.3 million; and EBITDA of $25.0 million, Dow Jones said.

“We will offset federal capital gains taxes entirely with available capital loss carry-forwards,” the company said. It added that it expects to update its recently reported third-quarter earnings to record a special gain of $1.07 per share.

J.P. Morgan Securities Inc. and Dirks, Van Essen & Murray, the Santa Fe, N.M.-based newspaper brokerage, served as financial advisors to Dow Jones. Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisor.


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