Merrill Weighs in on Pulitzer Suitors

By: Jennifer Saba The bids for Pulitzer are due today and Gannett and Lee Enterprises are the reported frontrunners, according to an article in The Wall Street Journal. The price for Pulitzer is speculated to be around $1.5 billion.

Gannett's name has been bandied about as potential buyer since Pulitzer first made the announcement in Novmeber that it is exploring such opportunities. But Lee's entry added a twist. Merrill Lynch issued a report today -- a Pulitzer update -- that said the firm was "somewhat surprised to hear Lee's name."

In that report, the investment firm put a pencil to the numbers and analyzed how a potential deal would affect Gannett and Lee.

For Gannett, the potential acquisition of Pulitzer would contribute only a small amount to the bottom line. If the deal goes through, the St. Louis-based company would represent roughly 6% of Gannett's revenues. "While we would similarly look favorably upon a successful Gannett bid for Pulitzer," the report said, "Our initial opinion is that it might be too small to make a big difference."

Further complicating the transaction would be the TV station that Gannett owns in St. Louis. The company would have to either appeal to the Federal Communication Commission seeking a temporary waiver until cross-ownership rules are decided or dump the TV station, which brings in roughly $65 to $75 million in revenue. In addition, Gannett and Pulitzer are in joint operating agreement over the paper in Tucson, Ariz., where Pulitzer owns the morning paper and Gannett owns the afternoon paper. Gannett may have to untangle itself, divesting its 50% interest in the JOA.

Lee has the opposite problem -- a purchase might be too big for the company. The report said that Lee's market value is about $2 billion. Merrill Lynch is quick to point out that Lee's acquisition of Howard Publications for $649 million in 2002 was considered a success.

It's also likely Lee might only be interested in part of Pulitzer -- the report speculates Pulitzer's community newspapers, which generated $130 million in revenue last year. With a price tag of an estimated $500 million, it would be an easier reach for Lee, the report concluded.