Lee Enterprises Emerges As Buyer Of Pulitzer In $1.46 Billion Deal

By: Mark Fitzgerald
Lee Enterprises, the community publisher whose flagship is the 54,000-circulation Quad-City Times, is buying Pulitzer Inc. in a cash deal valued at $1.46 billion.

With the acquisition of the St. Louis Post-Dispatch, Pulitzer's 13 other dailies, Lee will become the fourth largest U.S. newspaper publisher in numbers of dailies owned and seventh largest in circulation, growing from 44 to 58 daily newspapers in 23 states, with a new total circulation of 1.7 million daily and 2.0 million Sunday.

Combining calendar 2004 results, the two companies noted, Lee?s revenue will rise by more than $440 million, to $1.14 billion.

The Pulitzer purchase also gives Lee more than 100 weekly newspapers, shoppers, and niche publications, including the Suburban Journals of Greater St. Louis that ring St. Louis with 38 community papers boasting a total distribution of more than one million copies each week.

Under the agreement, Pulitzer Inc. will become a Lee subsidiary. With the addition of about 4,000 people from Pulitzer, Lee will have about 10,700 employees, though that head count is expected to fall as Lee consolidates operations.

Pulitzer and Lee announced the acquisition late Sunday night. They said Lee would pay a cash purchase price of $64 a share. Pulitzer stock closed at $62.90 at 4 p.m. EST Friday on the New York Stock Exchange.

The acquisition marks the second big leap in Lee's growth. In 2002, the chain swallowed up Howard Publications, an acquisition that in one fell swoop increased its revenues 50% and its circulation 75%. Pulitzer and Lee noted in their announcement that the Pulitzer acquisition will increase Lee?s size by 60 percent in revenue and 50 percent in circulation.

Lee Chairman and CEO Mary Junck said the acquisition was a continuation of Lee's long-term strategies.

"It?s another terrific acquisition for Lee ? and, in both order of magnitude and revenue growth opportunities, remarkably similar to our highly successful purchase of the 16 Howard newspapers three years ago," she said in a statement. "The acquisition of Pulitzer allows us to take an exciting and logical next step into another exceptionally attractive group of markets, exactly the kind where we excel as an industry leader in building revenue and circulation."

"Because of Midwestern lifestyle and economic similarities, we view St. Louis as very much like other Lee markets where we have been so successful," Junck added.

In the combined company, Pulitzer will represent about 39 percent of the revenue and 34 percent of the daily circulation.

Junck said the purchase price of $64 per share translate into a multiple of 13.5 times operating cash flow. The purchase includes $290 million of Pulitzer cash, marketable securities and restricted funds, and the assumption of $306 million of Pulitzer debt. For Lee?s fiscal year ending Sept. 30, 2006, the first full year of post-merger combined operations, after projected revenue and cost synergies, the transaction price translates into an estimated 11-11.5 times operating cash flow, Junck said.

Lee said the transaction will be financed by a $1.55 billion fully committed bank facility led by Deutsche Bank and SunTrust Bank.

"Although this transaction takes Lee?s initial level of debt higher than it?s been historically, we are confident that the combined cash flow of the business will enable us to return quickly to an investment grade profile," Junck said.

She said the transaction will be "immediately accretive to free cash flow, as was the case with the Howard acquisition."

Michael E. Pulitzer, grandson of founder Joseph Pulitzer and chairman of the Pulitzer board of directors, said the Pulitzer board had approved the deal unanimously as "the best way to enhance value for all Pulitzer?s shareholders."

"As part of Lee, our newspapers will benefit from greater scale and resources, which are necessary to compete effectively in today?s increasingly competitive media market," Michael Pulitzer said in a statement. "Lee and Pulitzer share similar cultures and values, beginning with our long history in, and passion for, the newspaper business. We both care deeply about our employees, communities and the public trust, and we manage our newspapers in the same devoted ways. In short, we couldn?t have found a better steward to continue Pulitzer?s 125-year legacy of journalistic excellence.?

Pulitzer CEO Robert C. Woodworth called Lee "among the best newspaper operators in the industry, with an especially impressive record for revenue growth."

The Pulitzer acquisition also puts Lee in another kind of big league: Along with the newspapers, Lee is buying Pulitzer's small minority stake in the St. Louis Cardinals baseball team.