Heritage Folds Two Pubs Into Enterprise –

After a little less than two years as majority owner of Enterprise NewsMedia, Boston-based Heritage Partners recapitalized the community-newspaper publisher, allowing the firm to take out an undisclosed dividend while at the same time freeing up capital to support the company for a run at future add-on acquisitions. Promptly following the refinancing, Heritage unveiled the purchases of The Call Group and The Norwood Bulletin for the platform.

As part of the recap, Wachovia Securities arranged and underwrote a $100 million facility, reportedly made up of a $25 million revolver and a $75 million term loan. Heritage originally gained a majority stake in Enterprise through a 2003 recap in which the firm invested $43 million of equity into the company.

Enterprise is a collection of daily and weekly local newspapers. The company controls such names as The Quincy Patriot Ledger and The Brockton Enterprise. The additions of The Call Group and The Norwood Bulletin will bolster the lineup with four new non-daily publications serving the Southern half of Massachusetts.

“We have a pipeline of acquisitions that we’re pursuing,” Heritage Founding Partner Michael Gilligan told Buyouts. “The refinancing allows us to defer amortization payments and generate the free cash flow needed to do that over the next 24 months.”

Gilligan said that an improvement in Enterprise’s financial performance was partly behind the recapitalization. “When we invested in the company two years ago, we felt that we were investing at a relative trough in the ad cycle. The Help Wanted’ sources of ad revenue had been declining for the last three-to-four years, but that has started to build up again and has been growing in the 10% to 15% range.”

Gilligan also added that the market in which Enterprise plays-targeting towns “south of the [Mass] Pike” -has some of the more positive demographic trends in New England, with “population growing faster than any other region.”

Future acquisitions from Enterprise are expected to target mostly weekly community newspapers, although Heritage would not disclose how many titles the platform will ultimately carry. Gilligan did note that Heritage is hoping to add anywhere between 25% and 50% in revenue growth through the add-ons.

The investment came out of the 1999-vintage, Heritage Fund III L.P., an $843 million vehicle. The fund has roughly $100 left uncommitted, and the firm will likely head to the market with a follow-up fund later this year.