A.H. Belo puts The Providence Journal up for sale

USA Today

PROVIDENCE, R.I. (WPRI) – The Providence Journal may soon be sold.

A.H. Belo, the Dallas-based company that has owned The Journal since 1997, announced Wednesday morning it has begun seeking a buyer to purchase Rhode Island’s statewide daily.

“The Providence Journal is an important financial contributor to our company, and the newspaper’s commitment to the citizens of Providence and Rhode Island is unmatched,” A.H. Belo CEO Jim Moroney said in a statement. “However, with A. H. Belo’s focus on investing and growing in Dallas, it makes sense to explore this opportunity.”

Moroney had said as recently as October that The Journal was not for sale, but he couched his comments within weeks, telling investors the statement was true “at the time of that interview.” A.H. Belo completed the sale of one of its other two newspaper divisions, The Press-Enterprise of California, last month.

A.H. Belo has tapped Stephens Inc., an Arkansas investment bank, to seek out potential buyers interested in purchasing The Journal. The company said selling the newspaper would generate additional cash to invest or return to shareholders and allow it to focus on its flagship newspaper, the Dallas Morning News.

“I’m not surprised,” Ken Doctor, a media analyst at the research firm Outsell and the author of “Newsonomics,” told WPRI.com. “It’s clear that A.H. Belo is circling the wagons around its home base, Dallas. The Morning News has outperformed Projo and Riverside and has always been a more dominant player there.”

In a statement, A.H. Belo cautioned it “cannot guarantee that an appropriate buyer will be located or that a transaction could be closed on acceptable terms and conditions.” After the announcement A.H. Belo shares fell less than 1% to close at $7.62 in New York Stock Exchange trading. That’s up from $4.65 at the start of the year.

Howard Sutton, The Journal’s publisher, informed employees that the paper was for sale during a 9 a.m. meeting Wednesday at its headquarters on Fountain Street, which itself was already up for sale. “This announcement opens a new chapter in the history of our news organization,” Sutton told his paper.

“Ownership of our news organization may change, but the mission of The Providence Journal remains unwavering: to operate an independent and profitable news organization of unquestioned integrity devoted to the dissemination of excellent journalism in Rhode Island while ever maintaining an outspoken voice for the welfare of the people who live and work here,” Sutton, who has worked at The Journal since 1973, continued.

Employees were told the sale process is likely to stretch into the middle of 2014 and perhaps longer, according to John Hill, president of the Providence Newspaper Guild union, which represents about 160 Journal workers. Stephens will put together a book to show potential buyers what a transaction would entail.

“There’s anxiety,” Hill told WPRI.com. “It’s uncertainty, in a business that has been far too uncertain for far too long. … I think there’s a little sense of unreality about it right now. Until we see who is putting in for it, I think that will be when you know how to feel about it.”

Sale price estimated up to $45M

Doctor said he expects The Journal to sell for a low price just as The Press-Enterprise did. He estimated the Providence paper’s annual earnings before interest, taxes, depreciation and amortization at roughly $12 million a year, and said it’s possible A.H. Belo will try to sell The Journal’s real estate separately.

Without the real estate included, The Journal would likely sell for between $28 million to $45 million, Doctor said.

Rick Edmonds, media business analyst at the nonprofit Poynter Institute in Florida, echoed Doctor’s analysis and said A.H. Belo may succeed in finding a new owner. “Typically properties put up for sale [right now] are finding buyers, though often the price is very low,” Edmonds told WPRI.com.

“In evaluating a sale price, it is important to find out what the building, and other assets are worth and who gets them, typically the buyer,” he said. “Same with pension liabilities, which typically stay with the seller.”

A.H. Belo is already handling the sale of The Journal differently from the sale of The Press-Enterprise.

In the California paper’s case there was no advance public disclosure that a buyer was being sought – the first statement about the situation was A.H. Belo’s Oct. 10 announcement that the paper had been sold. In The Journal’s case, however, A.H. Belo has made the search for a buyer public before one is found.

Buyer faces declining circulation

Speculation in Rhode Island immediately turned to whether The Journal would be bought by a local ownership group or sold to new out-of-state owners. Robert Whitcomb, The Journal’s recently retired editorial-page editor, suggested the possibility that the paper could become not-for-profit.

“I don’t think there is a waiting buyer, but [rather] that the offer is meant to flush out local buyer(s), who sense a turnaround potential and a civic investment,” Doctor said. However, he added, “Philly’s experience there is cautionary, with a revolving door of often-squabbling ‘civic owners,'” a reference to the troubled local ownership group that bought The Philadelphia Inquirer in 2012.

Like many newspapers, The Journal has struggled in recent years amid the continued migration of readers from print to digital news.

The paper’s weekday circulation has fallen by nearly half over the last six years, from 143,190 in 2007 to 76,447 as of Sept. 30. Advertising sales have plunged 66% since 2005, falling to $46 million last year. But rising revenue from third-party printing contracts and higher circulation prices have helped offset some of the ad losses.

Continued aggressive cost-cutting, including another round of layoffs and voluntary buyouts this fall, have kept The Journal profitable despite the drop in revenue, according to A.H. Belo. The number of employees at The Journal has dropped from 709 in August 2008 to 385 today, according to the paper.

Company executives have also blamed the paper’s revenue woes on Rhode Island’s anemic economy.

“They have a very punishing tax structure, and way more municipalities than a geography of that size could possibly support, so they need to deal with the fundamental reforms and structure of government, which is not an easy process,” former A.H. Belo CEO Robert Decherd told investors earlier this year.

Belo Corp. paid $1.5 billion in 1997 for the then-independent Providence Journal Co. and its nine television stations. In 2008, Belo split its TV and newspaper divisions into separate companies, with the new A.H. Belo taking The Journal and its sister papers, the Dallas Morning News and The Press-Enterprise.

Prior to the Belo takeover, the Journal Co.’s broadcast division brought in 58% of its revenue. While it’s hard to say exactly how much of the $1.5 billion price tag represented the value of the newspaper itself, one-third of the total would put it at $500 million.

‘There’s an opportunity here’

A sale of The Journal would be the latest in a string of changes to newspaper ownership in Southern New England.

Boston Red Sox owner John Henry paid $70 million to buy The Boston Globe in August, and the following month Rupert Murdoch’s News Corp. sold the New Bedford Standard-Times, the Cape Cod Times and their sister papers to an affiliate of GateHouse Media Inc. Henry is now looking to sell the Worcester Telegram & Gazette, which he acquired as part of the Globe purchase.

Farther away, Amazon.com founder Jeff Bezos recently paid $250 million to buy The Washington Post from its longtime owners, the Graham family.

Doctor said Henry “probably isn’t interested” in purchasing The Journal considering his decision to sell the Telegram & Gazette and focus on The Globe, “though there would be some synergies (newspaper and baseball) in combining some operations.”

“He may be asking his people to run some numbers,” Doctor added. Through a spokesman, Henry declined to comment.

“There’s an opportunity here,” Hill, the union president, said. “We may be able to find a person or group of persons from Rhode Island who are interested in owning Rhode Island’s preeminent newspaper, and will see the newspaper as the civic institution it is and not simply another component in a corporate array that’s expected to hit certain monetary targets.”

The union would be willing to talk to any potential buyers to explore ways its members could help make a transaction successful, he said.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

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