The Nevada newspaper mystery — a business perspective

I would love to break the story of who bought the Las Vegas Review-Journal for a pricey $140 million last week. Can't do that today, but here are a few business thoughts on the transaction:

About that price: New Media Investment Group closed on the Review-Journal and other Stephens Media properties in mid-March for $102.5 million.  The sale represents a nifty 36.6 percent gain in nine months.

And it's even better than that.

New Media acquired seven other dailies and is keeping them.  So the gain is even bigger than it appears.  New Media said the sales price was seven times EBITDA (earnings before interest, taxes, depreciation and amortization) over the last 12 months. New Media did not provide a comparable figure when it was buying but has said it has averaged paying a 3.9 multiple in the many transactions it has completed over the last two years.

Also New Media's Gatehouse subsidiary will continue to manage the Review-Journal --presumably for a nice fee.

For the seller, this is a win-win-win scenario.

New Media's release did reveal that the paper was not on the market when it received the offer. That suggests the parallel case of multi-millionaire Alice Rogoff, who made an attractive unsolicited offer of $34 million to McClatchy for the Anchorage Daily News in April 2014 (which was accepted).

Whoever he or she may be, we are looking at a very motivated buyer, paying a big premium to seal the deal.

Sheldon Adelson, prime suspect: When big money is rolling around Las Vegas, all eyes turn first to Adelson. Not only is he a free-spending, would-be kingmaker in Republican presidential politics, I learned this morning in an interview with Nevada Public Radio that he is backing legislation to outlaw online gambling, which he sees damaging his casino businesses.

So if Adelson is the guy, he is buying the potential to influence the potentially pivotal Nevada primary February 23 and whatever state and local matters he cares about.

Plus, Adelson already owns a paper.  A little less than a decade ago he launched Israel HaYom (Israel Today), a free distribution daily in Israel with a conservative bent, badly damaging a pair of more liberal competitors.

I wasn't attempting prophecy when I wrote in September 2012:

You’ve heard of Sheldon Adelson, the Las Vegas billionaire who bankrolled Newt Gingrich’s campaign and continues to pour millions into Republican Super PACs? Suppose he also owned and generously funded a free-distribution newspaper pushing his political agenda and driving competitors into deep financial distress.

Couldn’t happen here? Probably not. But Adelson’s five-year-old Israel HaYom (Israel Today) has become the country’s best read daily. The venerable Maariv, in business since shortly after Israel’s independence, is being sold at a liquidation price with deep cuts certain to follow.

Perhaps it could happen here, and is. (Adelson and his representatives have declined any comment on the transaction).

Michael Schroeder, strange bedfellow: About all that is known about News + Media Capital Group, is that its public-facing manager (front-man if you pardon the invidious term) is Schroeder.

Not the last person in publishing I would expect to turn up in the transaction, but an unlikely one.

Schroeder, a former Newsday executive bought the New Britain Herald and Bristol Press near Hartford in early 2009 after Journal Register (now part of Digital  First Media) had given notice the papers were being closed.

Schroeder had no connection to the area, but read an article in the New York Times about the situation.  When he and I talked a year later at a New England publishers meeting, he explained that he had concluded the papers could be revived with better management and a strong hometown community connection (absent in the notoriously cheap Journal Register operations).

He moved first to Bristol then, a few years later, to nearby New Britain and has served as editor and publisher of both.  Schroeder re-articulated his community connection strategy in a five-year anniversary interview with the Herald in January 2014.

I placed a call to Schroeder and will add his comment if I hear back.  I thought he was committed for the duration to the two Connecticut papers.  However, with scale so important to digital transformation and expense control, he may want to cash out and sell to an acquisitive chain -- like New Media Investment Group.

Odd but not illegal. Hedge fund owners like Alden Global Capital and Angelo Gordon typically do not respond to questions from the public and press, but I'm not aware of a parallel case where a buyer kept his or her identity secret.  Indeed most billionaire buyers want recognition for saving a teetering enterprise and participate with professional managers in needed reinvestment.

The secrecy also is out of step with increased ethical focus on transparency.  Review-Journal editors and reporters have been openly expressing discomfort over not knowing who they will be working for when the deal closes early next year.

A political agenda for a rich buyer is not unprecedented. Doug Manchester favored real estate development and other pro-business positions in his time as owner of the Union Tribune of San Diego.  But that too is the exception at newspaper organizations, for the practical reason that partisanship will chase off some readers at a time when audience retention is critical.

A well-reported Los Angeles Times piece on the brouhaha suggested ownership may be revealed when News + Media Capital has its annual meeting in March.  If you wasted some of your youth, as I did, reading Agatha Christie novels, you know that the prime suspect is often not the one whodunit, and less obvious motives may hold the key to the puzzle.

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