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Rumors that the U-T is considering a bid for only $15 million were so startling to me that I was reluctant to post that suggested price in the blog entry below. However, it has been pointed out to me that in late December, a report on the worth of the New York Times by Barclays Capital valued the Boston Globe, owned by the Times, at $12 million to $20 million. The Wall Street Journal and New York Times itself printed the $20 million estimate at that time. I have retrieved the Barclays study. It estimates that cash flow for the Globe this year will be only $4 million. Barclays is valuing the paper at only 3 to 5 times that cash flow. The Times's 17.5% stake in the Boston Red Sox is valued at $140 million to $166.25 million. Many investors have been astonished by the Barclays report. Some thought the estimated Globe valuation was a typo. And there are some minor mistakes in the report (such as spellings) that suggest a certain sloppiness. The Times paid more than $1 billion for the Globe in 1993. While such deflation seems improbable, the valuations of newspapers, particularly dailies, in the stock market have been almost as severe. As reported below, the debt rating of Black Press has fallen more deeply into junk territory. Standard & Poor's says that the company's major debt problem is the money it paid for the Akron Beacon-Journal in 2006. Black's Canadian papers, consisting of most that it owns, give it a cushion, says S&P. So would Black buy another American paper, even at such a low purported price? (I also want to stress that it is not clear whether the value of Globe or U-T real estate assets are included in the reports floating around.)

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Comments

JohnnyVegas Feb. 16, 2009 @ 9:14 p.m.

David Copley is probably crying about this.

I don't doubt the UT could be valued as low as $15 million, and to be honest, in this capital/credit market it may be even hard to get that much credit for the purchase. Would have to do all cash or a stock swap.

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Don Bauder Feb. 17, 2009 @ 6:30 a.m.

Response to post #1: Black Press is privately held and its debt has a junk rating. There are a lot of variables in this: is the La Jolla real estate included? Etc. David Copley's health may also be a consideration. There are rumors that the company will go online six days a week and only print a paper on Sundays. Neither Black nor Copley is talking. Best, Don Bauder

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Visduh Feb. 17, 2009 @ 9:20 a.m.

Really? A Sunday paper only? That's almost unthinkable, but then look at how the U-T keeps shrinking. What are the economics of keeping a printing plant for only one edition a week? I suppose you have a much smaller press, and print the supplement pieces days ahead, then put out a small "news" section that prints Saturday night.

I keep wondering what this shrinkage of newspapers and their circulations is doing to the paper industry. Years ago, the Canadian paper plants were raising their newsprint prices almost at will. If they're suffering, I can only say that it could not happen to a nicer, more deserving bunch of "bleeps."

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Don Bauder Feb. 17, 2009 @ 9:33 a.m.

Response to post #3: Remember, these are rumors. The $15 million price bandied about may be quite low, as I originally suspected, and the possibility of printing only a Sunday edition may at this point be strictly latrine rumor. It is clear, however, that the newspaper industry is losing altitude, and value, rapidly. That $15 million could be in the ballpark, particularly if cash flow is negative or nearly so. If the U-T were to go online-only for six days a week, there would be a monumental change in the San Diego media picture. Best, Don Bauder

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WhatGoesAround Feb. 17, 2009 @ 9:56 a.m.

"To a philosopher all news, as it is called, is gossip, and they who edit and read it are old women over their tea. Yet not a few are greedy after this gossip."

                               Henry David Thoreau

Food for thought. Please keep those rumors flying to your blog, Don. They give an old woman comfort in her twilight years.

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Don Bauder Feb. 17, 2009 @ 11:46 a.m.

Response to post #5: Well, as both the author and the editor of these blog items, I qualify in one respect: age (almost 73). I'm in my dotage. I drink only decaf tea. It sounds like Arsenic and Old Lace gives you comfort in your twilight years. Best, Don Bauder

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JohnnyVegas Feb. 17, 2009 @ 11:52 a.m.

Don, if the UT went online only that woudlk be the end o fit-I don't think they could just publish a Sunday paper-and make it work. That's just my opinion.

Now, what I would like to know if this-if the UT is doing so bad, how is the NC Times doing???? As well as the weekly papers like the La Jolla Light, OB Beacon and the PB Beach and Pay Press.

Heck, are they still printing the Daily Aztec????

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HellcatCopley Feb. 17, 2009 @ 2:30 p.m.

Unless the UT is printing other papers, there is no way to operate the pressroom with folks who work only one day per week. Are the reporters and Karin to be told to head over to production and plate up the presses? Operating the presses is actually one of the most skilled jobs in the place and the idea of it done one day a week is silly.

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Don Bauder Feb. 17, 2009 @ 2:50 p.m.

Response to post #7: Online is growing rapidly as a source of news, but for newspapers, it is not profitable. Online advertising is hard to come by. So newspapers are frantically trying to find ways to make the online editions pay off. However, if the ink-and-paper editions are not profitable -- and U-T's would be only narrowly profitable at best, and possibly unprofitable -- then something would have to be done. Some other papers are moving in the online direction. Best, Don Bauder

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Don Bauder Feb. 17, 2009 @ 2:55 p.m.

Response to post #8: Your observation that one-day-a-week in print is silly is a well-grounded one. But you seem to be assuming that the newspaper would be printed in Mission Valley. It's possible that printing, pagination, and backshop functions would be done remotely. If one-day-a-week printing were done in Mission Valley, there would have to be massive layoffs and retraining. And it may not be possible. In any case, if things continue as they are now going, there will have to be further substantial personnel cuts. Best, Don Bauder

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WhatGoesAround Feb. 19, 2009 @ 12:50 p.m.

Don - I have the highest respect for your work, as well as for many of the Union-Tribune's employees, remaining and former, who work(ed) not just in the newsroom but in all areas of the operation. I feel the pain of the contraction of the newspaper industry too. The ". . . old women over their tea. . . " quote wasn't meant to insult you. Just trying to put it all in some perspective. If the lessons suggested by your reporting were better appreciated, I think the newspaper industry would be healthier today.

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Don Bauder Feb. 19, 2009 @ 4:12 p.m.

Response to post #11: You don't have to worry about insulting me. That's what blogs are for. When I responded to you (post #6), I was teasing. Maybe that didn't come through, and for that I apologize. Best, Don Bauder

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Sportsbook Feb. 20, 2009 @ 3:57 p.m.

I call BS on that price.

A paper in Mesa AZ has two offers on the table at 12Mil. per.

I also know there is an offer for the OC Register at a substantially higher price then that.

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Don Bauder Feb. 20, 2009 @ 4:40 p.m.

Response to post #13: Yes, the rumored price could be low. That was my immediate reaction. That is why I hedged this blog entry very carefully, noting that some people strongly questioned the $20 million valuation on the Boston Globe (although the NY Times and Wall St. Journal had repeated it without a challenge.) A Boston business paper recently said that the Times could get $155 million for the Globe. I do not believe that. Look at how the stock market has deflated the value of newspapers: in 2004, Lee Enterprises stock sold for $49. It's now 52 cents. In 2004, Gannett, the largest chain, sold for $91. It's now $3.70. In 2005, McClatchy sold for $76. It's now 51 cents. In 2007, GateHouse sold for $17. It's now 10 cents. Lee, McClatchy, and GateHouse have excessive debt, unlike (I believe) Copley. However, McClatchy and Gannett have sound journalistic reputations, unlike Copley, although I have never found that good journalism and valuation are more than casually correlated. Since I posted this, people in the media business have found the $15 million credible. But no outsider knows, because so much depends on cash flow. If it's negative, and costs have already been slashed severely, and online is not terribly promising, what is a newspaper worth? Good question. We also don't know what would be a part of any sale: the La Jolla properties, e.g.? I continue to state that the $15 million rumor is credible, but the number could be a good deal higher. I have reason to believe that the sale could come soon. The U-T is reportedly trying to inflate its receivables. Best, Don Bauder

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Sportsbook Feb. 22, 2009 @ 1:32 p.m.

Trust me, I understand how valuations have tanked. I just can't believe that the land in Fashion Valley alone isn't worth close to 15. Add the LJ property and yeah, Id' say it has to be more then 15.

The offer for the register is more then 3 times that much, and the papers are pretty comparable number wise.

I did notice a new online servie the UT has, where for 25 dollars a yr one can get the entire paper online, 55 cents a week I think. This may be an interesting way to get 25 dollar per-reader instead of giving away the news for free. Local news is where they should contentrate their reporting. I can go to google news to find out what went down in DC today, but if I want to know about a rash of crime in Mission Beach I rely on the the SD union/trib. I watch this scenario closely, and in my opinion, if Copley can hold out I think he should wait for the market to turn around before he sells. Unlike everyone else out there, being debt free is a huge plus. Heck didn't the Journal Register just declare bankruptcy today? I think a real positive though is Lee was able to restructure it's debt...who knows...All I know is I hope this city doesn't lose it's only daily.

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JohnnyVegas Feb. 22, 2009 @ 2:42 p.m.

Trust me, I understand how valuations have tanked. I just can't believe that the land in Fashion Valley alone isn't worth close to 15. Add the LJ property and yeah, Id' say it has to be more then 15.

The land could be worth $20-$50 million or more, but when valuing the UT you have to also consider their debt. If they have debt that exceeds the value of the land then there is no net value-but a net loss.

Since the UT is a private company there is no way to know their net operating income or debt, unless they disclose it-which they may be doing to a potential buyer but not the public.

So I wouldn't read too much into the land values. If the value were there I think the paper would have sold by now.

I don't think Copley is getting anything but bottom feeders and low balls. And in this credit crunch I bet those have stopped too.

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Don Bauder Feb. 22, 2009 @ 8:27 p.m.

Response to post #15: Interesting observations. Suppose the land in Mission Valley is worth $15 million and La Jolla building and land possibly more than that. But you are also getting a newspaper. The financial industry does not believe in the future of newspapers, and there is no credit available. U-T's revenue and profits are tanking. Cash flow may be slightly positive or negative. The buyer has to decide what to do with the paper: A. Slash employment further to make it profitable (hopefully); B. Go online several days a week and in print only 2 or 3 days; C. Have a Sunday-only print edition and the rest of the week online; D. Do everything possible to squeeze more money out of the online edition (something the company is already trying to do); E. Liquidate the news operation and have a shopper; F. Paginate and print the paper from a remote location, thus avoiding the use of U-T's antiquated equipment; G. Liquidate the business altogether and try to make money on the real estate. Of course, we don't know if the La Jolla real estate is for sale. I have been doing some doodling to show how horrible the situation is: 1. Lee Enterprises, a chain of papers greatly in the Midwest but including the North County Times: the market cap (the value of the company according to stock price) is $23.4 million. Revenue is more than 3 times the U-T's. The enterprise value, or the market cap plus debt and a few other things is $1.44 billion. Theoretically, that's what the company would cost an acquirer. Who would pay $1.44 billion for a company valued by the market at $23.34 million? Lee stock is down 95.6% over the past 52 weeks. 2. Journal Register Co., just filed for BK, stock worth one-third of a cent a share; market cap $137,800 and enterprise value not applicable (of course). Stock down 99.58% last 52 weeks. 3. McClatchy:Revenue 6 times U-T's, has some excellent papers. Market cap $42.1 million, enterprise value $2.1 billion because of excessive debt. Stock down 94.7 percent over last year. All these are heavily leveraged, and I don't believe Copley is. We don't know what might be part of any deal for the U-T -- particularly the La Jolla real estate. What we do know is that the market places a horribly low value on newspapers, particularly dailies.

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Don Bauder Feb. 22, 2009 @ 8:37 p.m.

Response to post #16: Again, I don't feel the U-T is too laden with debt. I have no reason to believe that it took stock when selling assets, and the stock has plummeted. I think it got cash for those assets. Net income and cash flow are quite important and we don't know those, as you point out, although the company has told managers they are down sharply, along with revenue. The deep recession and credit crunch complicate matters greatly. I just can't see that the Union-Tribune as a separate operating company is worth much in this newspaper market and economic environment. The value would be in the land, but that has tanked in San Diego, too. David Copley's health and the desires of his close friend may play a large role in any decision, too. Best, Don Bauder

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Don Bauder Feb. 23, 2009 @ 7:15 a.m.

NOTE: PHILADELPHIA NEWSPAPERS FILE BANKRUPTCY. The Philadelphia Inquirer and the Philadelphia Daily News filed for bankruptcy late Sunday night (yesterday, Feb. 22). Local investors had bought the paper in 2006, taking on a bundle of debt. The Journal Register, as noted above, also declared bankruptcy over the weekend. Other newspaper companies that have gone into the tank include Chicago's Tribune Co., which includes the Los Angeles Times. It went into BK late last year. The Minneapolis Star Tribune, bought in late 2006 by a private equity group, filed for BK last month. The Philadelphia papers want to continue operating. Best, Don Bauder

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JohnnyVegas Feb. 23, 2009 @ 9:02 a.m.

It is interesting to note that these hedge funds/private equity firms who were rolling in the dough in the last 10-20 years seem to have gone over a cliff with many of their investments, like the Minneapolis Star Tribune.

Big newspapers and Chrysler immediatley come to mind.

I wonder if any of these hedge funds will go the way of Amaranth?

I have not heard of any, but I find it hard to believe that many of them won't be BK very soon.

The Mayor of Lansing, MI was on Fox News TV a few days ago defending the union compensation for UAW's, and he pointed to all the money that Wall Street has received in this bailout with no strings attached and asked why they weren't required to give up anything...... and if they weren't why should the UAW's?

Two wrongs don't make a right, but there is a double standard, and I have to agree with his comments on that point.

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Don Bauder Feb. 23, 2009 @ 10:37 a.m.

Response to poset #20: I agree. Gretchen Morgenson of the NY Times had a good story on the topic Sunday. Is there a way to get these Wall St. bandits to cough up the hundreds of millions they raked in when they were driving their own firms -- and the entire global financial system -- into the ground through wildly imprudent gambling? Best, Don Bauder

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