Why is Cox Moving Those Papers Now? And Will They Sell?

By: Jennifer Saba Another major newspaper chain has decided to put up for sale several of its properties -- including the Austin American-Statesman -- even as other dailies around the country continue to languish on the auction block. That was Wednesday's news. The question today is: Why?

Just two years ago, the potential of owning a newspaper in an attractive market like say San Diego -- another city with a daily up for grabs -- would have local fat cats, strategic players, and private equity firms licking their chops.

Today, why would any operator hang a "for sale" sign in a market flooded with dailies?

"To be honest, it's a buyer's market," said Robert Nolan, a managing partner at Halyard Capital.

Executives at the privately held Cox Enterprises decided two weeks ago when it retained Citigroup (and Goldman Sachs for its Valpak division) that it was time to put its community newspapers in Colorado, North Carolina, and Texas on the market so it could re-evaluate its portfolio of businesses and pay down debt.

Sandy Schwartz, who was appointed president of Cox Newspapers in May, said the Atlanta-based company did not quietly seek out buyers before making the decision to go public with the sale on Wednesday. Citigroup had advised Cox not to make an announcement; instead, the investment bank had preferred to prepare for the auction without the aid of the media spotlight.

"There are a lot of ways to do this," Schwartz said about putting properties up for sale. "But one way is to make sure that employees hear it from you first."

The company is expected to have its books ready in the next three to four weeks -- and Schwartz is fairly positive the properties will not only sell but fetch decent prices, multiples anywhere from 5 to 10 times. "This is not a fire sale," he stresses. "If we find out that Austin does not bring in the value or if we don't find the right buyer, we will continue to operate [it]." That sentiment, he added, extends to all the properties on the block.

Schwartz told E&P that since the announcement Cox has received inquiries regarding two Texas papers, the Longview News-Journal and The Marshall News Messenger.

He would not disclose Cox's debt-to-EBITDA ratio, a measurement used to calculate a company's ability to pay back loans.

Cox is willing to entertain selling off those properties in pieces. Schwartz estimated that at least three or four different buyers could come forward for various newspapers.

But as Halyard Capital's Nolan puts it, there are so many papers on the market that the competition for bidders is stiff.

Of course there are always the strategic players -- companies like A.H. Belo, which carries little debt and operates a flagship newspaper just three hours north of Austin, or Hearst with its dailies in Houston and San Antonio -- which might show some interest in the Texas papers.

Nolan brings up that it was a strategic player, Cablevision, that plunked down $650 million for Newsday in May.

As for the private equity circle, "everything has a price, even in a falling-knife scenario," Nolan said.