Newspaper Deals Double in the Last Stretch of '04

By: Jennifer Saba The last two weeks of December proved to be fortuitous for those buyers hungry to snap up newspaper properties.

As of Dec. 16, The Jordan, Edmiston Group counted 74 worldwide newspaper transactions totaling $2.7 billion. That number jumped considerably in the last stretch of the year. The merger and acquisition advisory firm found transactions totaled $4.1 billion with 83 deals at the close of 2004. In 2003, there were 58 deals totaling $4.1 billion.

Though 2004 finished ahead of 2003, the deals were smaller. In 2004, five transactions over $100 million occurred, including Hollinger's $1.3 billion sale of the Telegraph Group to Press Acquisitions and Journal Register Company's $415 million acquisition of 21st Century Newspapers. In 2003, there were seven transactions that each totaled over $100 million.

In fact, the end of December captured three of the five biggest deals of the past year, including Pearson's $1 billion sale of Spanish media company Recoletos. This means the market is gaining steam in terms of transaction size, explained Adam Gross, vice president of marketing at JEGI.

The reason that most of 2004 saw little activity was the dearth of sellers. "Advertising revenue has been down at newspaper companies across the industry," Gross said. "This caused profits to deteriorate. As a result, sellers would have had to sell at low valuation levels. Additionally, given the downturn in the market, strategic buyers were on the sideline, revamping their own businesses. These factors combined to prevent a wide array of sellers coming to market especially in the mid-market, where $100 million transactions occur."

Look for greater merger and acqusition activity in 2005, he said. Many of the larger players have made cuts and revamped their business and are ready to grow profit and revenue through acquisitions. Gross also notes that since the financial community is stuffed with cash, "the pressure to invest capital is causing these firms to drive up transaction multiples."