Analysts Hail Sale of New York Times Company's TV Stations

By: Jennifer Saba In a flurry of notes released this morning, analysts said they are pleased that the New York Times Co. is selling off its television division, which contributes a small portion -- about 4% of total revenue -- to the bottom line.

The move "makes strategic sense, in our view, as it will tighten management's focus on its newspaper and digital properties," wrote Merrill Lynch analyst Lauren Rich Fine.

"Overall we believe this is a positive announcement and reflects an increasing level of corporate agility as traditional media companies fight to remain important players in the quickly changing media landscape," wrote Alexia Quadrani, an analyst with Bear Stearns.

At Prudential Equity Research, analyst Steven Barlow wrote this is nothing but good news "as investors do not want to own the stock because of the TV stations."

Now for the money: Estimates are in the same ballpark. Wachovia Equity Research analyst John Janedis thinks the Times will fetch somewhere between $430 million to $516 million or a multiple of about 10 to 12 times EBITDA for the nine stations.

Merrill Lynch pegs the transaction at 11 to 13 times EBITDA. Bear Stearns estimates a multiple of 12 to 13 times EBITDA or $515 million to $560 million. Prudential goes with 12 times EBITDA or about $500 million.

All think the Times will use the proceeds of the sale to pay down debt -- Prudential estimates $822 million by the year end before the sale -- as well as for new acquisitions in high growth areas, stock buybacks, and special dividends.

The potential buyers? Merrill Lynch and Prudential believe its likely Hearst, Sinclair, Paxson, Nexstar, and LIN will express interest. However, both Fine and Barlow wrote that FCC regulations and duopoly rules could limit their ability to get a seat at the bargaining table.

"We suspect there will be more interest in individual stations versus the group as a whole as buyers would likely find more value in clustering around existing properties," Fine wrote.

Overall, the decision is expected to goose the stock in the short term but not by a lot. All the financial analysts point to the challenges the newspaper industry faces, those twin specters of declining circulation and ad revenue, and remain cautious on the stock.

Janedis even goes one further raising the possibility, though a long shot, that The Boston Globe could be next to have a price tag affixed to it.

After signaling out the company as "one of the strongest franchises in the newspaper industry" with favorable demographics and readership, "a secular decline in newspaper advertising spending and the continued deterioration of the Boston Globe business are major fundamental issues that make us somewhat cautious on the stock," Janedis wrote.

As of late this morning, the New York Times' stock was trading up 65 cents to $22.92.