By Jaewon Kang Updated 05:20 PM, Jul-23-2014 ET
Dallas-based Belo, which announced in December that it was exploring a potential sale of the newspaper to concentrate on its native state, said after the market close on Tuesday that it is selling the Providence Journal to New Media Investment Group Inc. for $46 million. The deal is expected to close in the third quarter of 2014.
“It didn’t make sense for [Belo] to run any major newspaper in Providence,” said Kevin Kamen, president of newspaper brokerage firm Kamen & Co. Group Services. “They need to stay in Texas where they are strong.”
After Belo sheds The Providence Journal, the company’s portfolio will consist of two Texas newspapers, the Dallas Morning News and the Denton Record-Chronicle.
The divestiture makes sense for Belo, Kamen explained, because the Providence Journal “has been going down in value significantly in the last 10 years.”
He explained that, unlike its profitable Texas division, the Providence Journal publication has seen a decrease in revenue streams and circulation.
Belo, in its 2013 annual report, noted as much, saying the newspaper experienced a drop in daily circulation to 104,938 last year from 113,284 in 2012.
By contrast, the company’s Dallas Morning News Group unit saw its daily circulation jump to 389,815 last year from 387,357 the year before.
Given the circulation drop, the $46 million price tag for the Providence Journal may have been too high, according to Kamen, who projected last year that the newspaper could be sold for $41 million.
He explained that New York City-based New Media may have been willing to write the check to “keep others from buying [the paper]” and to cement its position as a dominant newspaper owner in the New England region.
New Media is a parent company of GateHouse Media Inc., which filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Sept. 27, 2013. The company exited bankruptcy on Nov. 26 after swapping its debt for reorganized equity. Newcastle Investment Corp., owed $626 million, had majority control of the reorganized Gatehouse while the company’s other secured lenders owned the remainder through New Media, which is the entity they formed. New Media then assumed full ownership.
For New Media, the Providence Journal represents a larger property than it’s used to. The company owns 78 dailies and 235 weeklies, from the Bulletin in Norwich, Conn., to the Daily Report in Coldwater, Mich., to the Record in Stockton, Calif., to the El Dorado Times in El Dorado, Kans.
As for Belo, the sale of the publication is not likely to signal further sales, one industry source said.
The media company is likely to use the money from the transaction to bolster its operation in Texas, the source said, adding that Belo probably won’t explore selling its Texas assets because the Belo family owns and actively controls the publication.
Belo is not a newcomer to divestitures, having spun off its newspaper division in 2008 before selling its broadcast business to Gannett Co. Inc. for $2.2 billion in 2013. It also sold Riverside, Calif.-based Press- Enterprise to Freedom Communications Holdings Inc. for $27.25 million last year.
If anything, Belo could pursue smaller acquisitions and chase after weekly newspapers in the Texas region, Kamen & Co.’s Kamen said.
Deal activity in the newspaper market have been fluid this year. News Corp. sold its New York City community newspapers in June, less than a year after divesting its Dow Jones Local Media Group Inc. to an affiliate of private equity firm Fortress Investment Group LLC. The Minneapolis Star Tribune was sold to Glen Taylor, the owner of the Minnesota Timberwolves, in June, too.
Belo, which trades on the New York Stock Exchange under the ticker AHC, has a market capitalization of $246.13 million. Shares are up about 50% year to date, closing at $11.18 Wednesday.
New Media, which also trades on NYSE under the ticker NEWM, has a market cap of $436.73 million. Shares are up about 38% year to date, closing at $14.55 Wednesday.
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