Lee to acquire BH Media

This deal demonstrates the financial challenges of the newspaper industry.

Lee is paying 140 million dollars and financing at nine percent, which is about 12.6 million dollars a year. Current EBITDA of the BH papers is 47.4 million dollars on revenues of 373 million dollars. Lee claims they will achieve 20-25 million dollars a year through synergies (we know what that means). So, if Lee pulls off the cost reductions, and stabilizes revenues they would have additional EBITA of about 70 million dollars and this is a great deal.

But last year Lee revenues declined 8.2 %. If you apply that 8.2% decline to BH that means revenues are declining at a rate of 30 million dollars a year. Which means that if revenues decline at the rate 0f eight percent a year in three years the cash flow at the papers turns negative and there is no money to pay off the loan.

Buffett is brilliant and I am sure will come out of this OK. I don't think anyone at Gannett is nearly as smart and their deal will go to hell.

One interesting note in the Lee release is that Berkshire will keep the real estate. So if you work at a BH paper expect to move.

 

Thought that was interesting too. Apparently Lee gets a 10-year lease, but I'm sure there are terms for that to be broken. With the way downtown Tulsa has grown in recent years, I'm sure they could make a decent amount selling the buildings they own here.

 

Does Tulsa print downtown or has it been moved to the outskirts of town,

 

I'm pretty sure the previous owner of the paper in Waco owns the real estate and didn't sell that to BH when the paper was sold. It's a big building in a prime location of a downtown that's going through revitalization -- Thanks, Fixer Upper! -- and most of the building is empty since printing takes place off-site.

 

Downtown still. We also print the Oklahoman, the Wall Street Journal, New York Times and USA Today, which brings in a good revenue stream for us.

 

I knew Tulsa printed Oklahoma City and I would guess the NYT, WSJ and USA Today for damn near the whole state. I wonder what happens to the NYT and WSJ when papers start to reduce publishing frequency. The guy who owns most of the papers in Maine is eliminating his Saturday edition. I read an article where when asked if he would continue to publish and deliver the Saturday editions he said sure,a s long as the national publishers would pay 100% of the costs for Saturday printing and delivery. Otherwise it was not his problem.

 

Updating this, they've split up that hub. Lynchburg is only doing Lynchburg and Danville; Charlottesville and Bristol moved to their respective newsroom; and Roanoke is doing Roanoke and Martinsville.

 

I think Hickory, N.C., was still doing the design for a lot of the North Carolina papers (except Winston-Salem and Greensboro) ...

 

Wonder how much of that will wind up as bonuses for Mary Junck?

 

Hickory’s design hub had closed and its design hired out to Lee prior to the sale today, I believe.

 

All of it.

 

Going to be interesting to see how some Lee-BH shops co-exist, most notably Lincoln Journal Star and OWH, who cover the same team, the Huskers.