F irst-round bids are in for Herald Media Inc., the newspaper publisher that controls The Boston Herald and more than 100 community newspapers in Eastern Massachusetts.
More than 10 groups submitted offers, with a handful expected to be invited back for a second round. A final sale could occur before the end of the first quarter in 2006.
Herald Media is currently controlled by Patrick Purcell, who in early 2001 acquired the community newspapers from Fidelity Investors for $150 million. To help finance the deal, three private equity firms – Audax Group, BMO Halyard Partners and Weston Presidio – committed a combined $60 million in exchange for a minority stake.
At the time, local wags suggested that the deal would be Purcell’s folly, just as it had been Fidelity’s. After all, why would a big-city daily burden itself with a vast, and relatively decentralized, series of publications devoted to school lunch menus and little league box scores?
The irony, of course, is that the cash flows for Herald Media were completely reversed in the proceeding four years. Whereas people could find political, business and sports news in more and more printed and online venues, the school lunch menus and little league box scores continue to be staples in the community papers. Also, online classified services, such as Craigslist.org and Monster.com, have done far more cannibalization in the city press than in the suburban papers. In fact, several prospective Herald Media buyers asked if they could bid only on the community papers.
Auction agent Wachovia Capital Markets, however, has been steadfast in insisting that the deal is for all of Herald Media, which also would include some valuable downtown real estate.
A source familiar with the negotiations says that a variety of private equity firms and strategic players submitted bids, and that the prospect of “regional expansion” is a key selling point.
The identities of the bidders have not yet been disclosed, although Heritage Partners is no longer considered to be a buy-side player. Instead, the firm is now being viewed as a seller, whereby it would package its Enterprise NewsMedia LLC platform with the Herald Media assets.
Ross Posner, a principal with Heritage, said that his firm would not comment on any potential deals.
Knight-Ridder Draws Interest
In unrelated newspaper sale news, a consortium of private equity firms last week expressed interest in Knight-Ridder Corp. (NYSE: KRI). Blackstone Group, Providence Equity Partners and KKR are among two potential buyers – The McClatchy Co. is the other – with first-round bids due last Friday.
Goldman Sachs and Morgan Stanley are the agents of the Knight-Ridder sale, which could generate an excess of $5 billion. Knight-Ridder, is the nation’s second-largest newspaper publisher in the United Stats, with 32 daily newspapers, including the San Jose Mercury News and the Miami Herald, among others.
Last week, the Gannett Co., which publishes 99 daily newspapers and has TV holdings as well, said it would take a hard look at whether it wants to bid for Knight-Ridder.