Ian Pike 4 p.m., March 14
If 3 Major Dailies Are Worth $22 Million, What Is U-T Worth?
There is a Dallas company named AH Belo Corp. that owns 3 major daily papers: the Dallas Morning News, Press-Enterprise of Riverside, and Providence Journal. The company has little debt: in fact, it has almost as much cash as debt. The stock market values the company at only $20 million. There is another measurement of a company, called the enterprise value. It is the market capitalization plus debt, minus cash on hand. That is generally considered the price which an acquirer would have to pay. AH Belo's enterprise value is $22 million, almost the same as its stock market value. So, theoretically, you could buy the Dallas Morning News, Riverside Press-Enterprise and Providence Journal for $22 million, and you would be getting a company without a debt burden. The company is losing money. So what is the U-T worth? There has been lots of controversy. According to one rumor, it could go for as low as $15 million. Some point out that the Mission Valley office building and plant could be worth $50 million. But asset value is only one aspect of a sale. What's also important is going concern value: what is the business itself worth? As you can see, the stock market thinks daily newspapers aren't worth much. Most newspapers that are going into bankruptcy or liquidating these days are heavily in debt. An example is Lee Enterprises. It owns 49 dailies including the North County Times and St. Louis Post-Dispatch, plus 300 other papers. Yet the market values it at a mere $17.5 million. Its enterprise value is $1.44 billion because of its huge debt load. I do not believe the Union-Tribune is laden with much debt. So it really resembles AH Belo. The question is whether the U-T is losing money, as AH Belo is, or is cash flow negative. I suspect it is in the red now.The rumor about the U-T going for $15 million, which sounds shockingly low, does not sound so low when compared with AH Belo's theoretical value.