"Maquarie snaps up community newspapers in Texas and Oklahoma
January 24, 2007
The Sydney Morning Herald (Australia)
Macquarie Media Group Ltd has swallowed American Consolidated Media for $102 million and says it has an appetite for more US community newspaper businesses.
The Macquarie Bank-backed fund, which already has broadcast assets, is "in a number of discussions" with other US newspaper businesses, including some exclusive negotiations, but declined to offer more details.
The US community newspaper industry is large with about 7,800 different newspapers and has highly fragmented ownership, so there are opportunities for growth.
ACM publishes 40 newspapers distributed in nine regional communities in the US states of Texas and Oklahoma.
In the 11 months to November, it posted earnings before interest, tax, depreciation and amortisation (EBITDA) of $8.9 million with an EBITDA margin of 25.1 per cent.
The acquisition is expected to be yield neutral in fiscal 2007, Macquarie Media said.
A spokesperson declined to give further forecasts.
"But obviously this is a first step in a broader strategy to build a larger portfolio that has the potential for improved market coverage and operating efficiency," the spokesperson said.
She said the operating environment in which ACM sits is "quite different" from Australia's declining newspaper market.
"We're talking about a community newspaper business, so it's kind of hyper-local, with a highly targeted audience and very local news.
"So there's little competition from other media.
"There's also significant barriers to entry because ACM has got the local franchisees and news gathering that works, and they're difficult to replicate."
Population growth in Texas and Oklahoma is generally above US averages making those states solid growth markets, the spokesperson added.
Macquarie Media managing director Alex Harvey said, as an asset class in general, community newspapers generate stable cash flows from predominately local advertisers, have little dependence on circulation and classified advertising, and limited capital expenditure requirements.
Of the 40 publications picked up in the deal, 16 are what the company calls "shopper" and specialty publications, 19 are weekly newspapers and five are dailies.
The ACM buy will be funded by a refinancing of Macquarie Media's local radio arm, Macquarie Regional Radio Networks, and the issue of Macquarie Media securities to some of ACM's existing investors.
Final settlement of the acquisition is expected in early February, subject to regulatory approval.
ACM was acquired from shareholder groups including Halyard Capital and Arena Capital Partners and several New York and Boston-based private equity funds.
It represents Macquarie Media's first foray in the print medium, and in the US, adding to its cache of Australian regional radio stations, its 13.8 per cent stake in Southern Cross Broadcasting Ltd and its 60 per cent stake in cable TV provider Taiwan Broadband Communications.
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