Dan Primack, writing for PE Week Wire, says Pat Purcell is now actively soliciting bids for the Boston Herald and Community Newspaper Co., which comprises about 100 papers in Eastern Massachusetts. (“PE” stands for “private equity.”) First-round bids are due today, according to the item. Primack writes:
What exactly is for sale? Is it just the private equity consortium’s minority stake? Is it just the community papers? Is it also The Boston Herald itself?
The answer is that Wachovia [the financial firm that’s helping Purcell broker the deal] is seeking bids for the entirety of Herald Media Inc., and that it hasn’t been too receptive to partial proposals. Why? Because, on a cash-flow basis, the community newspapers are the jewel while the Boston Herald is the millstone. As I’ve discussed previously, community papers continue to outshine most big city dailies because (A) They often has exclusive news-you-can-use content (school lunch menus, pee-wee football scores, church events, etc.) and (B) Their classifieds have not been cannibalized too much by Monster, Craigslist, etc. This dichotomy is particularly striking in the case of Herald Media, where the big-city daily is a secondary read that doesn’t have much home delivery distribution outside the city limits. It also has been hurt by a free tabloid partially owned by The Boston Globe (thus lessening the Herald’s number of subway/bus readers).
To reiterate, bids are due today. Expect offers anywhere from 9x-12x cash-flow, and a new Herald Media owner by springtime.
Among the possible buyers, according to Primack: Enterprise NewsMedia, which owns the Patriot Ledger of Quincy and the Enterprise of Brockton. Kind of ironic, given that Purcell had long wanted to buy those papers himself.
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Anonymous
How about the Globe/Times as possible suitors? They could merge the operations with The Metro. Sure, the DOJ would be interested in such a move. But thought I would posit the idea.
Anonymous
I find it hard to believe that Enterprise NewsMedia has the kind of capital needed to buy Herald Media. If that does happen, it could be the type of crash and burn that the Eagle Trib experienced when it overpaid for the Salem and Gloucester papers, except on a much larger scale.
Mike Stucka
Let’s just wait and see how much of the coverage of this focuses on the Herald and how much on the CNC community papers. My guess is the big-city papers just like to talk about their big rival, and then there’ll be two paragraphs about how the small papers are doing OK financially.I did a quick check — most of the Boston Globe stories about possible sales and/or cuts don’t even mention the community papers.Ya gotta love that disconnect with the only part of the industry that isn’t panicking.
Ron Newman
I wonder how vulnerable some of the CNC properties may be to upstart competition. Here in Somerville, it’s fascinating to watch the steady rise of the locally-owned Somerville News, which has both a paper and an online edition. The online site now consistently breaks news well ahead of CNC’s slow-moving Somerville Journal.
AmusedButInformedBystander
Dean Singleton, who owns Fitchburg and Lowell and a bunch of weeklies in Northern Mass. and who was rebuffed by the Rogers clan for Lawrence would seem a likely bidder, with his penchant for consolidating printing operations. He would happily take operations to an office building or old warehouse, print at a joint plant with his other dailies and let Purcell make a bundle on the real estate after getting rid of the $155 million “senior credit facility.” Also seems a decent fit for Lee Enterprises, which picked up the Pulitzer empire last year and which seeks acquisitions with “under performing revenue per circulation unit” Lee also has a piece of the baseball Cardinals, so it would be worth it just to watch and the sanctimonious sports staff submit its collective resignation rather than risk conflict of interest, by reporting on a Red Sox – Cardinals spring training game.
tony schinella
As a former employee of CNC, I’m a tad surprised by this – but not all that surprised. The Herald could be a better paper by doing what they are famous for doing – breaking the big stories and scandals. But it seems that over the last four or five years, all they have been doing is tabloid stuff. When I was take my lunch break and look the paper over each day, I would be done with it before I was done my lunch. That is how little there was in there that interested me. Which, is shocking, from a long-time reader. The paper’s heyday – in the early 1990s, with its gritty political coverage – have long since gone unless they can figure out a way to get it back. They have tried to do some other things – like blogging and online content, which is good. But it is so sad to see it now. However, the finances are all on the CNC side, because, as noted, there is a built in audience for these papers because they are weeklies and cheaper to put together. Of course, the CNC side is the part of the company which Purcell has been strangling for years. The reporters make half of what the Herald reporters make and often do two times – if not three times – the work. Because they are unionized, a Herald reporter makes about $40k a year and might do five stories if they are lucky; a CNC reporter makes $20k-$25k and is expected to do six to 10 stories a week, and take pictures! We all know the joke about the head of the union threatening Purcell at a dinner party to unionized the CNC staff and him freaking out – and later allegedly giving the Herald employees better health care figures for not unionizing the CNC employees.When I left a year ago, we were still using W98 HDs which were sooo ssslllloooowwww it would often hamper our productivity. For example, a 1MB courtesy photo being sent in would 5 to 10 minutes to download and open. If I had to open six or more a week, that was a lost hour of productivity, etc. You all probably know the drill.In a corporate meeting with Purcell and a couple of other guys, I explained the need for new HDs – which at the time you could get a good one for about $300. I explained that productivity would increase and we would be able to do more with such a small capital upgrade. I then asked why someone didn’t try to barter for some new HDs so we could increase productivity. Noting that the Herald had these big full page ads from Dell and other companies, it would only take a couple of full page ads in our CNC papers to pay for each editor to get a new HD. In other words, it wasn’t a lot of money we were asking for. Well, we never got it and the idea was sloughed off. But, if you think about it for a second, that is 20 hours a week-plus in lost productivity time from our one unit just waiting for pictures to open up on our slow computers!
Mike Stucka
Tony, I know your pain all too well. I think the small papers get told not to spend any money until they HAVE to — but that neglects the idea that some problems can be prevented, and some solutions will pay for themselves in very little time. (My favorite: “No” on an idea that would have paid for itself in two months, and then gone on saving money.)Speaking of money, the Globe has a story on the Herald deal.http://www.boston.com/business/globe/articles/2005/12/02/deadline_pressure/True to form, where there’s a focus the column focuses on the Herald, and doesn’t even mention the financial success of the community papers.
tony schinella
Good point Mike. Plus, the CNC wing is hugely profitable. Purcell was correct to buy them – even though he overpaid for them, at the height of the market. And then, Sept. 11 happened and killed us. I will also say that I admired how Purcell would come to all of the units with a breakdown on how things were going. But after awhile, it got to be a broken record: CNC profits up; Web profits up; Herald profits down …
Anonymous
I bid two bits!