Goldman Sachs’ Year in Review: Newspapers Did Poorly — In Good Economic Times

By Mick Gregory

Read between the lines, top financial adviser, Goldman Sachs, (who’s CEO received a $50 million bonus this year) says dump your newspaper stocks.

david_geffen_150.jpgNote to David Geffen, buy the Santa Barbra paper from Ms. McCaw. You can have your political voice published there, just an hour up Highway One, at a fraction of the cost of the LA Times.

At the same time, media mogul David Geffen’s $2 billion bid for the Los Angeles Times is about $1 billion short of what big shareholders of parent Tribune Co. want for the mega newspaper, sources close to the company said.

Tribune shareholders, but more importantly, the Chandler family, believe the value of the L.A. Times is closer to $3 billion and have said any sale of the paper would have to be done as a tax-free transaction, sources said.

A private equity group made up of Madison Dearborn Partners, Apollo Management and Providence Equity Partners has met with Tribune’s management and Chandler relatives and are conducting serious negotiations. Merrill Lynch and Citigroup are running the auction process, which has been pushed into next year after the company got lower-than-expected initial bids.

Another option for Tribune’s board, which is being advised by Morgan Stanley, is to spin off the broadcast unit and the newspaper unit into two separate public companies.

“We do not believe spinning-off Tribune’s TV assets would create value for shareholders, however, as it is just separating to secularly declining businesses,” said Lehman Brothers analyst Craig Huber in a recent report.

Some shareholders, including the Chandler family, fear that the board will eventually call off the auction and the stock will go into free-fall.

The Chandler Family, Merrill Lynch and Citigroup had better find some suckers soon.

As the year comes to a close, it will prove to be the first time industry results have not been up to snuff during a healthy economy. In a report issued by Goldman Sachs on Wednesday, analyst Peter Appert and his team wrote, “2006 will likely end as the first non-recession year in newspaper industry history in which revenues declined.”

Goldman predicts that total revenue will sink 0.3% due to weak classified, national, and circulation revenue. If so, it will turn out to be the industry’s worst performance “since the recession-impacted results of 2001,” wrote analysts.

Tribune’s September announcement that it’s seeking strategic alternatives has whipped the market into frenzy. The newspaper sector is up 8.4% compared to an 8.3% gain in the S&P500. Year-to-date the group is down 0.7%. In 2005 it was down 20.5% and in 2004 it dropped 6.1%. The large-cap papers are the ones really benefiting: that group is up 3.7% year-to-date while small-cap papers are down 21.7%.

Should stockholders be encouraged by the rally? Don’t buy into the hype, Goldman warns.

“We continue to advise investors to sell into this recent strength based on our view that deteriorating fundamentals will trump restructuring speculation,” analysts wrote. “While we believe money can be made in ‘special situations,'” — E.W. Scripps and GateHouse Media are rated as “buys” –“we would remain underweight on the group.”

Back to advertising, the crumbling of classified is going to hurt the industry even more. Goldman estimates that in Q4, classified revenue will decline 3.4%. For the full year, it’s expected to dip 0.7%. In 2005 classified revenue grew 4.2%.

Jennifer Saba wrote in Editor & Publisher

Imagine the “carbon credits” newspapers will have to pay once the Democrat Progressives take full control of the government. All those trees, and the thousands of “crack head” adult carriers driving around in their pickups add up to a big bill to pay the political party they have supported for the past 30 years.

3 thoughts on “Goldman Sachs’ Year in Review: Newspapers Did Poorly — In Good Economic Times

  1. Does anyone know how the LA Times, NY Times or SF Chronicle handled the Sandy Berger scandal? He obviously took out damning evidence of Bill Clinton’s out of the national archives. Berger removed these documents because they had personal notations that he and other senior Clintoon types had scribbled in the margins or by underlining. Can you imagine the brouhaha that would have ensued had it been a Repub stealing docs? After the Plame flame-out over precisely nothing? neville up above is of course silly, but the MSM is colluding in the crimes of the left and inventing crimes by the right. Billy Jeff and his crew are a left-wing cabal supported by the LAT and NYT and the pilot fish.

    Like his boss Billy Jeff, Berger is a liar through and through, and guilty of a felony that should bar him from classified documents for life. He is a criminal.

    Of course, they won’t cover this. It isn’t “news” unless it hurts Bush and the Republican party. Will they ask Hillary/Oboma?

  2. December 26, 2006

    To: McClatchy employees
    From: Gary Pruitt, CEO

    Many of you will have heard or read by now that McClatchy has agreed to sell the Minneapolis Star Tribune to Avista Capital Partners. We expect the deal to close in the first quarter of 2007.

    And while there were a dozen newspaper transactions associated with our acquisition of Knight Ridder earlier this year, I know this particular deal comes as an unsettling surprise. Selling an established McClatchy paper certainly is not business-as-usual for us.

    Details about the deal are available in the attached press release, but I want to speak directly to you about one point: this deal came about because of very specific conditions involving the Star Tribune and today’s changing media landscape. We have no plans to sell any other newspapers.

    In fact, we struck this deal to make the company stronger overall. While it is painful and difficult to say farewell to talented and hardworking colleagues at the Star Tribune, we know that McClatchy will be in a stronger position going forward as we work with you in building the news company of the future.

    Following the sale and the debt repayment it allows, McClatchy will be in better shape to navigate through changing conditions. It will improve our operating performance, increase operational flexibility and give us freedom to make investments to extend our growing online operations.

    This sale might lead some to conclude that McClatchy has doubts about the direction of our company or that the Knight Ridder acquisition has proved ill advised. Both conclusions are wrong. Thanks to the Knight Ridder additions, our portfolio of newspapers and related enterprises has never been stronger. We are not complacent about the future, but we are very confident. We are not waiting for events to overtake us; we are actively building our future together instead.

    Our mission remains unchanged: to bring the benefits of independent, public service journalism to the communities we serve. It has animated this company for nearly 150 years, and it animates us still.

    If you have questions about this deal or what it means to you, please talk with your supervisor, or write to us directly at We have much hard work ahead of us, but we can approach the future more confidently as a result of the sale we have announced today.

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