Hollinger's menu

By: Lucia Moses BILL OF FARE FEATURES HOST OF APPETIZERS

In a bid to increase its stock price, Hollinger International Inc. is selling its 77 small daily and 302 nondaily newspapers. The company plans to focus on its metro papers, including the Chicago Sun-Times and Canada's National Post.
Conrad M. Black's Toronto-based empire, taking a cue from the America Online-Time Warner union announced earlier this year, plans to seek merger partners such as broadcasters or Web sites for its big papers, going on the belief that newspapers and other media will need each other to stay competitive.
"At the right price, they would all be for sale," said Jack Boultbee, executive vice president of Hollinger. "But the preferred desire is to form mergers, to create multimedia businesses in those cities."
In addition to the Sun-Times and its surrounding papers as well as The National Post, Hollinger said it plans to keep the Daily Telegraph in London; the Jerusalem Post; The Ottawa Citizen; The Gazette in Montreal; Alberta's Calgary Herald and The Edmonton Journal; and Vancouver's The Province and The Vancouver Sun.
Hollinger is replacing the top editor at its Chicago tabloid with two from Vancouver on the eve of a major relaunch.
Hollinger, which is being advised by Morgan Stanley Dean Witter, plans to sell the papers within 20 weeks. The company said the papers should beat profit estimates this year and bring in $1.4 billion to $2 billion, based on a multiple of nine to 12 times EBITDA (earnings before interest, taxes, depreciation, and amortization). The company plans to use the proceeds to reduce debt and buy back shares.
Like those of its peers, Hollinger's stock price has languished lately, in the vicinity of its 52-week low of 911/16.
Analysts have been down on the company because of its high debt of about $1.7 billion, related to costs of acquisitions and taking the Daily Telegraph and Canada's Southam Newspapers private, and its high Internet and newspaper start-up costs. They note that investors perceive the company as having a complex structure.
Hollinger International is 40%-owned by Hollinger Inc., a Toronto holding company that is two-thirds controlled by Black. The company gets a significant amount of cash flow from Canada and operates its Canadian community newspapers separately. The company spent heavily to launch The National Post in late 1998 and to gain market share in its battle with Thomson Newspapers' Globe and Mail. Additionally, the company racked up $13.5 million in InternetEBITDA losses in 1999.
"Hollinger International Inc. expects to emerge from this process with a significantly reduced debt level and a smaller number of outstanding shares, a stronger strategic position in relation to other media (and especially new media) and appreciably higher earnings per share," Black, Hollinger's chairman and CEO, said in a statement.
Montreal-born Black is known for his conservative-leaning views and battles with Canadian Prime Minister Jean ChrEtien, who has intervened to prevent the press baron from becoming a British lord. Black, with roughly two-thirds of Canadian dailies, entered the U.S. market in 1986 by buying 22 dailies. In 1994, he bought the Sun-Times and two local weekly groups. Over the years, he's also made runs at the New York market, trying to buy the tabloid Daily News in 1992 and the weekly New York Observer last year.
In the 1990s, Hollinger unloaded 130 of its U.S. dailies. Most were sold in two transactions, to the newly formed companies of Liberty Group Publishing and Community Newspaper Holdings Inc.
John K. Hartman of Central Michigan University, who wrote about Hollinger in his new book, "USA Today Way 2: The Future," said the announced sale reflects an increasingly competitive news industry that's made it tougher for publishers to achieve high profit margins. Hollinger has developed a reputation for buying small newspapers and draining profits at the expense of quality and circulation, he said. (The company's Community Group posted an EBITDA margin of 28% in 1999, above the industry average of 25%.)
Said Hartman, "The good news here is, these papers may come into the hands of more progressive chains ... or privately owned companies."

(Editor & Publisher Web Site: http://www.editorandpublisher.com)
(copyright: Editor & Publisher May 1, 2000)