Media Watch: 'Statesman' Off the Market
After entering final negotiations to sell the paper, Cox Newspapers walks away from the table
Cox Newspapers was in the final stages of negotiations to sell the Austin American-Statesman when management abruptly reversed course and took the paper off the market last week. The potential buyer was a group led by Walter Hussman Jr., publisher of the Arkansas Democrat-Gazette, which had reached agreements on most of the major deal points, according to a source close to the negotiation.
Instead, almost overnight, Cox walked away from the deal and announced it was no longer taking offers for the paper and its associated properties. "We always had a specific value threshold we wanted to achieve with the Austin American-Statesman," said Doug Franklin, executive vice president of Cox Newspapers. "We put a self-imposed deadline on ourselves that after a year we would either get it sold or take it off the market."
From the start, Cox vowed not to sell the paper for a "fire sale" price, even as the industry melted down. But the final offers were not "fire sale" deals, Franklin acknowledged. "We had good, serious offers," he said, refusing to elaborate on why Cox walked away from the table.
In recent months, Cox successfully sold the bulk of its other newspaper holdings, which were primarily in smaller markets, including the Waco Tribune-Herald and The Lufkin Daily News, which helped the company's cash position. The Waco paper was purchased by Clifton Robinson, who was part of the Hussman group bidding on the Statesman. (In one of his first acts as publisher, Robinson put the words "In God We Trust" on the paper's daily front page, reminding readers that a new owner can be, at best, a mixed blessing.)
According to coverage in the Statesman, staffers cheered when management announced the paper was no longer for sale. New owners would likely hack jobs and budgets, according to conventional wisdom. But there's no guarantee that cuts still aren't in the company's future. Cox has steadily slashed jobs at its flagship paper, The Atlanta Journal-Constitution. "We can't make guarantees until the market settles further," Franklin said.
In the last year, the Statesman shrank from 925 to 844 full- and part-time employees, but it has managed to avoid the wholesale cuts faced by other metro dailies. Earlier this year, management started running full-page "truth" ads, emphasizing the company was stable and profitable.
Potential buyers, however, were likely more fixated on the 20% to 30% drop in newspaper advertising experienced by many papers in the last year. Earlier this year, the field of suitors for the Statesman was publicly narrowed to five different groups, including Platinum Equity, the private equity firm specializing in "distressed" properties, which recently bought The San Diego Union-Tribune. Several of the groups submitted bids, but none made any progress. "We had hoped that Cox was willing to negotiate, but it didn't appear that Cox was," former Statesman Editor Rich Oppel, a member of one of the groups, told the Statesman.
At one point, a group led by Dallas-based Hicks Equity Partners, part of the empire controlled by Texas Rangers owner Tom Hicks, reportedly entered into exclusive negotiations to buy the paper. But the deal collapsed, and Hicks disappeared when the economic meltdown dissolved the equity firm's holdings and eliminated its ability to roll the dice on a newspaper purchase.
In recent weeks, the field of suitors reportedly shrank to the Hussman group and Platinum Equity, which continued to hover. In addition to Robinson, the Hussman contingent included former University of Texas law student Brian Ferguson, who was recently part of a group that purchased a stake in A.H. Belo Corp., publisher of The Dallas Morning News and owner of local ABC affiliate KVUE-TV. Although no one is talking numbers, few industry observers believe Cox was offered anywhere close to $200 million, the amount the company wanted, according to a Reuters report.
"The valuations of newspapers have been below sellers' expectations," said Mike Simonton, an analyst with Fitch Ratings. "Sellers are anchoring off historical valuations. Buyers are looking at the prospects for the industry and the availability of acquisition capital."
Either way, clearly Cox was not desperate to sell. (And Platinum is now hovering around The Boston Globe.) Company executives may have been swayed by a recent roundup of upbeat news. Despite the glaring year-to-year drops in advertising revenue, stocks surged in recent weeks on hints of a recovery. And last week, industry analyst Borrell Associates predicted industry-wide newspaper advertising revenue will increase next year and rise a modest 8.7% by 2014.
"We still feel very strongly that newspapers are a good long-term place for us to be," Franklin said.