By: Jennifer Saba With all the industry activity over the past year -- Knight Ridder, Tribune and now Dow Jones -- Bear Stearns analyst Alexia Quadrani looks at other potential targets in a note released to investors.
The most likely company to go on the block given how its shares are trading: The New York Times Co. "All signs point to the New York Times," wrote Quadrani. It has all the elements of a take-out candidate including restive shareholders, lagging margins, low debt, and a strong brand name.
The market certainly thinks as much, despite the controlling Sulzberger family's protestations to any offer. The company's shares are trading at premium relative to its peers at 10.3 times EBITDA.
However, Quadrani thinks the possibility of anything happening with the Times is low at best. If there is a slim chance, she estimates the Times would not receive the same kind of offer the Bancroft family is currently considering.
"Although the New York Times has a strong brand like The Wall Street Journal, it lacks Dow Jones' niche appeal and is therefore less likely, in our view, to fetch as high a premium as Dow Jones did - which likely lessens the likeliness of changing the Sulzberger family's mindset," she wrote.
Gannett, with its one class of shares, would seem to be a moving target. Quadrani noted the company is simply too big with a market capitalization of about $14 billion to consume. Furthermore, Gannett already runs a tight ship with high industry margins, leaving little room to cut in operations, according to Bear Stearns.
Journal Register Co., she wrote, is "open for negotiation.? Its high leverage, lagging performance, and markets with weak economics, especially in Michigan, will likely deter bidders, according to the note.
Bear Stearns remains underweight on the sector.
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