Reaction to Landmark's Sale: Why Now? And Who Might Take Papers?

By: Mark Fitzgerald and Jennifer Saba The last year has not been kind to newspaper transactions. Tribune's privatization strategy hung by a thread hours before Sam Zell closed a deal on Dec. 20, an auction that begged for bidders. The Dow Jones acquisition was a complete anomaly -- and even when the Bancroft family pleaded with other buyers to take a spin, there was a lot of bluster and no action.

And the market is punishing those companies that made acquisitions prior to 2007. McClatchy, hailed for its move to swoop in and pick up Knight Ridder, is being rewarded with a 70% drop in its shares.

So it's a wonder that the family of Frank Batten Jr. decided to put Landmark Communications, and its many newspapers, up for sale. Consider the timing: the newspaper industry is getting slammed by a downturn in advertising and fleeing print readers.

Landmark's announced sale took many by surprise including those who always have their fingers hoisted to assess the winds of the market.

"I'm a broker and I had absolutely no clue anything was up," Larry Grimes president of W.B. Grimes said earlier today.

"I just don't get this. They're going to make so much money from the sale of the Weather Channel it makes one wonder," Grimes said. "If the papers are performing poorly some would suggest we're within 12 months of performing a lot better. Why now? It's kind of a curious turn of events."

Landmark's Weather Channel, what many consider will fetch a handsome sum, is probably the catalyst for the potential sale since reports suggest it's worth $5 billion.

But Grimes thinks there are those sniffing around Landmark's 9 dailies and some 100 plus non-dailies. "My suspicion is that a couple of groups approached [Landmark] and said we'd like to buy this group of papers, would you sell them to us? Instead of saying yes, they went to financial advisors who suggested let's put it to an auction."

That kind of aggressive come-on has typified such acquisitive chains like GateHouse Media Inc. and Macquarie Media Group' American Consolidate Media.

The timing is even more baffling considering, as Grimes pointed out, that Landmark purchased the remaining shares of Capital Gazette Newspapers from the Eleanor Merrill family in the spring of 2007. That would have seemed to suggest that Landmark wanted to remain in the newspaper game.

Robert Broadwater, founder of Broadwater and Associates, a media investment firm, also thinks the timing is odd: "Right now its no great secret that Wall Street and investors in particular are not in love with newspapers." If Landmark sells the company off in chunks, it could get hit by a fairly hefty tax bill, Broadwater suggests during a call from England.

Potential buyers? "You got me stumped on that one," responded the Poynter Institute's Rick Edmonds. "It doesn't strike me as a good time to be selling newspapers,"

Gannett could flirt with Landmark, but Gannett's history with other newspapers up for sale of late suggests it will probably take a pass. Edmonds surmises that the Landmark papers could be a great fit for MediaNews Group but that the Denver-based company is stretched too thin at the moment with its recent acquisitions.

One thing is known: the value of any pending transaction will be driven by the cable business.