March 25 That sound you hear from the newspaper sector is owners running for the exits.
Spurred by signs of stabilization, thanks mainly to growing revenue from digital subscriptions, newspaper publishers, including the likes of Tribune Co and New York Times Co, are putting notable dailies - the Los Angeles Times, the Chicago Tribune and The Boston Globe - up for sale.
While they will not get an asking price of 10 years ago, there is a sense that the availability of cheap debt and the chance to turn a business around in the face of declining advertising revenue and circulation will lure buyers.
If they do, it means the newspaper industry will undergo the biggest change in ownership in more than half a century.
"You have to ask yourself why people who have been in the publishing business, in some cases literally for generations, are selling now?" said Alan Mutter, a managing director at media and technology consulting firm Tapit Partners and author of influential blog "Reflections of a Newsosaur."
It's not because newspapers are going to draw the big sale prices of even six, seven years ago. For example, The Boston Globe will likely go for about 10 percent of the $1.1 billion the News York Times paid for it 20 years ago, Mutter said.
"It seems as though (publishers) have decided to get out while the getting is good," he said.
Newspapers are now attracting the type of buyers who stand in stark contrast to the publicly held newspaper companies that were once the consolidators. Wealthy individuals like Warren Buffett, who is busy building a newspaper chain under Berkshire Hathaway, or rich locals like San Diego-based developer Doug Manchester, who bought U-T San Diego, are in the game now.
These buyers are looking to wield influence in the local markets, feel a civic duty to preserve the newspaper or think they can do a better job than the current owners.
SOME POSITIVE SIGNS
While few people would claim the newspaper business is in good shape, it is at least stabilizing partly because charging readers for digital content is starting to yield dividends.
"Digital subscriptions have been more successful than anyone had anticipated," said Leo Kulp an analyst with Citi.
"On the ad side, things aren't getting any better but they are not getting any worse. As you see the stability in the results, it's much easier to model and see what the future cash flows are going to be."
That compares with the low point newspapers faced four years ago, when forecasting revenue and cash flow was a guessing game.
"In 2009 you couldn't have that conversation," said Owen Van Essen, president of newspaper merger and acquisition firm Dirks, Van Essen & Murray, noting that severe revenue declines and high debt levels obscured cash flow estimates.
"Now most buyers are projecting flat revenue and cash flows," he said.
MULTIPLES STILL LOW
The circumstances for newspapers on the block are varied. Tribune Co, which owns the Los Angeles Times and Chicago Tribune, has hired investment banks to assess the sale of its newspaper properties after emerging last year from a protracted bankruptcy.
New York Times is moving to simplify its holdings by whittling them down to its flagship newspaper.
Still, the multiples for newspaper transactions are nowhere near their highs less than decade ago, when McClatchy purchased Knight Ridder in 2006 for $4.5 billion, or roughly 10 times earnings before interest, taxes, depreciation, and amortization (EBITDA). Or even Lee Enterprises' 2005 acquisition of Pulitzer Inc for $1.46 billion, or 13 times EBITDA.
On average, newspaper are selling for 3.5 to five times EBITDA, according to Van Essen.
For example, New York Times Co sold a group of 16 newspapers in 2012 for $143 million, or about 4.5 times EBITDA, said Citi's Kulp.
Buffett's Berkshire Hathaway bought more than 60 newspapers from Media General for $143 million, which equates roughly to four times EBIDTA, Citi estimated. (Buffett also provided Media General, which was struggling under onerous debt loads, with almost $450 in loans and credit lines in exchange for warrants.)
"The prices are very low," said Rick Edmonds, a business analyst with the Poynter Institute. "There are various kinds of buyers with the classic idea I can run it well.
"It's a whole lot more doable when the price is $10 million to back in the day when it used to be half a billion."