Newspaper acquisitions are suddenly grabbing headlines.
On Saturday, the New York Times Company announced the sale of the venerable Boston Globe for $70 million cash to Boston Red Sox owner John Henry. That news was eclipsed on Monday by word that Jeff Bezos, founder of Amazon.com, Inc., is buying the Washington Post for $250 million, a surprise deal for the industry.
What do those prices mean for the presumed eventual sale of Minneapolis’ own Star Tribune? The newspaper’s majority owner is Wayzata-based private equity firm Wayzata Investment Partners. As private equity firms typically acquire companies with the goal of eventually selling for a profit, Wayzata is expected to ultimately pursue its own exit strategy.
Star Tribune spokesman Steve Yaeger declined to comment on speculation about a sale of the local newspaper but said: “I think Jeff Bezos’ purchase of the Washington Post is certainly a vote of confidence in our industry and the prospects of strong local media brands.”
Calls to Wayzata Investment Partners and Mike Sweeney, chairman of the board of Star Tribune Media Holdings, were not immediately returned.
Beyond Bezos, legendary investor Warren Buffett is among those seeing opportunities in newspapers. According to its 2012 annual report, Buffett’s Omaha, Nebraska-based Berkshire Hathaway, Inc., spent $344 million to buy 28 papers in 2012 and late 2011.
But as the deals for the Globe and Post illustrate, newspaper prices aren’t what they used to be. For example, the $70 million deal for the Boston Globe represents a fraction of the $1.1 billion that The New York Times Company paid for the paper in 1993.
The Sacramento, California-based McClatchy Company, meanwhile, paid $1.2 billion for the Star Tribune in 1998, after accounting for selling off the magazine and book-publishing businesses of Minneapolis-based Cowles Media Company.
“Newspapers are worth less than half and probably a third of what they were worth 10 years ago,” industry observer John Morton, president of Silver Spring, Maryland-based Morton Research, Inc., told Twin Cities Business.
Morton noted that, for an investor, the Washington Post is a more coveted asset than the Boston Globe.
“Washington is the best newspaper market in the country. . . . It has a very, very strong franchise,” Morton said.
The Star Tribune has a deal to sell five city blocks to Minneapolis-based developer Ryan Companies US, Inc., which has proposed an ambitious $400 million redevelopment in Minneapolis’ Downtown East neighborhood. The land sale is slated to close on December 27, and the Star Tribune has consistently declined to comment on the sale price.
But based on the price that the City of Minneapolis is slated to pay for two blocks of the property for a city park, the total price for the land may be between an estimated $38 million and $39 million.
The Star Tribune filed for Chapter 11 bankruptcy in January 2009, following the $530 million acquisition of the paper by New York-based Avista Capital Partners in 2007. The newspaper emerged from bankruptcy owned by its senior secured lenders.
Wayzata Investment Partners became the majority owner in 2012, and the firm’s website offers an overview of its investment philosophy: “Our historical performance is attributed to our hands-on approach to sourcing distressed opportunities, working through the complexities of the restructuring process, stabilizing (deleveraging) the restructured business, focusing on strategies to enhance internal growth, and then identifying potential acquisition candidates.”