American Securities Capital Partners recently re-entered the media sector with the $100 million buyout of Westward Communications, a community newspaper conglomerate.
Westward Communications publishes 61 community newspapers in Texas and Colorado, which includes two Houston-area dailies and 59 weeklies. Of those, the Lone Star State holds 48 of the publications, with the remainder located in and around Denver and Colorado Springs.
ASCP last owned a media company when it purchased Community Pacific Broadcasting Company in January 1996. CPBC consisted of 11 radio stations broadcasting in Alaska, California and Iowa. ASCP sold the company in July 1997.
Westward was purchased at a multiple of nine times EBITDA, which is “on the low end of the range for media outlets, which tend to be eight to 13 [times EBITDA],” according to an analyst familiar with media buyouts.
ASCP teamed with Westward’s current management to complete the buyout. Additional investors include Citizens Bank and Antares Capital Management. GE Commercial Finance provided debt financing in the form of senior notes.
ASCP utilized American Securities Partners III, a $650 million fund that closed in July 2001. With an initial target of $500 million, the oversubscribed fund closed within eight months of its announced opening (see Buyouts, 7/30/2001).
According to Paul Rossetti, managing director at ASCP, the deal was a negotiated transaction “with no auction process.” Crutchfield Capital, a Houston-based investment bank, represented the target and “knew we were looking to purchase community newspapers, and they introduced us to Westward’s CEO,” he said.
Rossetti said ASCP’s exit plans are to grow the newspaper chain to “three times its current size” and sell to a strategic buyer in five to seven years. “We have been in local ad-driven businesses before,” he said.
The rising cost of printing and paper while in the midst of the largest advertising revenue slump since the early 1980s has squeezed profit margins at daily newspapers. But according to Rossetti, dailies and community weeklies differ greatly.
“Community papers are much more stable, printing costs are low and advertising [revenue] is actually up,” he said. “We also think the ad revenue slump has reached bottom and [revenue] will climb.”