By: Jennifer Saba
While it seems that McClatchy made a slam dunk with the MediaNews Group acquisition of four Knight Ridder papers for a high multiple, Merrill Lynch runs the numbers and calls the proceeds ?slightly better than expected.?
McClatchy said on Wednesday the purchase price for the San Jose Mercury News, the Contra Costa Times, The Monterey Herald and the St. Paul Pioneer Press works out to approximately 11.5 times EBITDA.
Merrill Lynch said accounting for taxes on the deal, the multiple shimmies down to 8 times EBITDA. McClatchy paid about 9.5 times EBITDA for Knight Ridder.
?We believe the proceeds will prove a bit better than our expectations, but not materially so,? according to a note released by Merrill Lynch on Wednesday.
Merrill Lynch estimates the four papers represent about 40% or $87 million of the $219 million in EBITDA that McClatchy plans to unload.
The research firm is forecasting McClatchy will fetch roughly $1.5 billion after taxes for all 12 papers. If McClatchy gets the same multiple for the sale of the remaining eight papers, it would receive about $1.7 billion (after taxes).
?However, we suspect not all the remaining properties offer the same margin and/or revenue potential and therefore the multiples could be somewhat lower,? according to the note.
Yet noting the sale process is moving swiftly and McClatchy is getting favorable results, the research firm still maintains its ?neutral? rating on McClatchy.
McClatchy is trading down $.18 this morning to $44.53. Knight Ridder is trading up $.30 to $61.92.