Showing posts with label Private Equity. Show all posts
Showing posts with label Private Equity. Show all posts

Tuesday, 18 November 2008

More companies may go private in new year - could the NYT Company be one of them? And might they have to write down the value of About.com?

I've been blogging with increased regularity now for some time on the very real possibility of the NYT Company going public-to-private.

If you think it's just the rantings of some nutter in the Auvergne, read this.


More companies may go private in new year
By Simon MeadsReuters
Monday, November 17, 2008
LONDON: A dearth of capital provided by banks may drive public companies into the arms of cash-rich private equity firms and could help rekindle the moribund market for public-to-private buyouts.
Private equity companies say there have been some signs of revival in the market, which has been virtually shut for more than a year, as institutional investors seek a way out of companies whose share prices have dropped.
There has been a pickup in business in just the past couple of weeks, with two public-to-private deals going into the due diligence phase, said Andrew Roberts, a private equity partner at the law firm Travers Smith.
A slow drip-feed of liquidity back into the system next year could give more impetus to the market for mergers and acquisitions, Roberts said.
"It's still going to be relatively small deals, in the hundreds of millions rather than the billions," he said.
In the first nine months of 2008, there were only 15 public-to-private buyouts in Britain, according to figures from the Center for Management Buyout Research.
The £2 billion, or $3 billion at current exchange rates, buyout of Emap, a media company, was the largest. It was one of only three buyouts worth more than £1 billion.
This contrasts with the 24 public-to-private deals made last year, including the European high-water mark deal - the £11.1 billion takeover of Alliance Boots by a consortium led by Kohlberg Kravis Roberts.
And there is a precedent for a rise in this type of deal after a sharp fall in asset values. Toward the end of the dot-com boom, there were 46 public-to-private deals in 1999 and 42 in 2000, accounting for 28 percent and 39 percent of total buyout deal value, respectively. That total includes other deals between private equity firms and buyouts by privately held companies.
Private equity firms have to put in more of their own money when buying a company with borrowed cash, and the size of such leveraged deals has dropped drastically after the credit crunch slammed the door shut on credit markets.
Private equity firms are hoping tight financing conditions may bring back the heady days. With markets for initial public offerings shut and a mountain of refinancing awaiting already tight corporate debt and loan markets, companies have few options.
"Large shareholders are hugely important in these types of deals," said Roberts, the private equity partner at Travers Smith.
In London, the FTSE 100-share index has slumped by more than a third already this year and large institutional investors are set to dominate shareholder registers as the hedge fund industry shrinks and retail investors continue to stay away.
"Now that prices have come down on the listed market, it will open up the possibility of doing public-to-privates," said Richard Chapman, a partner at the private equity firm ECI Partners. "You also have willing vendors."
"There is a desire by institutional investors to pull out of the smaller and midcap companies."
Sam Hart, an analyst with the brokerage firm Charles Stanley, said he believed that investors in any quoted company would be extremely pleased to see interest from private equity firms.
"I'm sure they would look extremely favorably on any approach, and as long as the offers they were making for companies represented a reasonable premium to the current share price, I would have thought they would be quite inclined to accept those offers," he said.
But, Chapman said, although there is room for a pickup in public-to-private buyouts, activity may not restart until 2009, after banks complete reporting 2008 balance sheets and there is an easing of bank debt.

http://www.iht.com/articles/2008/11/17/business/deal.php

And if you think some of my posts about About.com have been off-the-mark (I think the NYT Company overpaid for an out-of-date, distinctly uncool, ageing demographic, behind the Internet curve dot com company) then you might like to check in on this little gem about companies having to write down the value of assets on their books, bought when times were good and money was cheap: http://www.iht.com/articles/2008/11/17/business/deal18.php

Of course, if they are looking at a public-to-private, that wouldn't be such a bad thing would it?

Meanwhile they plan to merge iht.com into www.nytimes.com, effectively wiping value off the balance sheet - given how much they (overpaid) for the IHT when times were good and money was cheap. WaPo must be delighted.





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LOOKING FOR A CHRISTMAS BOOK GIFT TO BUY?
"Books about cosmopolitan urbanites discovering the joys of country life are two a penny, but this one is worth a second glance. Walthew's vivid description of the moral stress induced by his job as a high-flying executive with the International Herald Tribune newspaper is worth the cover price alone…. Highly recommended."
The Oxford Times

Amazon.co.uk
A PLACE IN MY COUNTRY
by
Ian Walthew


'I read
A Place in My Country with absolute unalloyed delight. A glorious book.'
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‘Ian Walthew was a newspaper executive with a career that took him round the world, who one day did a mad thing. He saw a for-sale sign on a cottage in the Cotswolds, bought it, resigned and moved in. For the first few weeks he just lay on the grass in a daze. Then he started talking to his neighbours and digging into the rich history of this beautiful part of England. Out of his inquiries grew this affecting and inspiring memoir.What sets it apart from others of its ilk is the author’s enviable immunity to cliché and his determination to love his homeland better than he used to.
His elegiac account of relearning how to be an Englishman should be required reading for anyone who claims to know or love this country.’ Financial Times


Amazon.com

A PLACE IN MY COUNTRY
By
Ian Walthew


For more reviews visit
ianwalthew.com

Wednesday, 29 October 2008

Should you the NYT Company be dismantled?



"At some point, you start to dismantle the companies"


Media (Forbes)
Selling Papers
James Erik Abels, 10.27.08, 6:00 AM ET
There's nothing like bad news to sell newspapers. Unless there are no newspapers left to sell.
Many people are wondering if this may soon be a reality. Revenues were in free-fall last week at many of the country's largest newspaper companies. "The only hope is that as we get through the spring, the rate of [the advertising] decline starts to ease up," says newspaper analyst Edward Atorino of The Benchmark Co.
On Friday, Gannett Co. reported that third-quarter revenue fell 9% from the same quarter last year to $1.64 billion. Other companies fared no better: The New York Times Company said total revenues fell 8.9% in the third quarter year over year to $687 million. And McClatchy posted third-quarter revenues of $451.6 million, down 16.4% over the same quarter last year.
Last week, the question on everyone's mind was whether the newspaper industry has hit bottom. Now they're wondering if these businesses can possibly rebound.
"[Newspapers] draw most of their advertising from the local economy," says John Puchella, a newspaper analyst with Moody's. As recession sinks in across the country, many of the local businesses that constitute newspapers' biggest ad buyers could disappear, he says--and an industry can't rebound if its market ceases to exist.
Where does that leave the papers? "At some point, you start to dismantle the companies," says Atorino. The newspaper industry's cost structure, staffing and share price are based on an outdated business model that continues to define financial expectations. So the goal would be to slough off enough costs to let younger, more nimble newspaper businesses live without the artificial market pressure of year-over-year comparisons.
Essentially, modern newspaper companies are the final legacies of an industry given life as a rich man's toy. The model was built in an era when high distribution and production costs kept new types of competitors at bay, anointing the dynastic fortunes of families like the Hearsts, Sulzbergers and Bancrofts.
Certainly, newspapers are being battered by massive declines in advertising due to a bad economy. Yet that decline is merely accelerating an ongoing and devastating trend of the newspaper business being destroyed by the Internet. The financial expectations on a younger company--and the staffing and business costs it agrees to build into its organization--may be more manageable than they are for today's behemoths.
Some industry observers have suggested that industry giants should go private. Take The New York Times Co.: With a market cap of $1.3 billion and roughly $1.1 billion of debt, buying the company out of the public market might be a steal--if someone could find the credit to consider a bid.
Sure, the Sulzbergers are often said to be uninterested in selling, and supposedly have an iron-clad stock-ownership plan that virtually ensures their grip on the Grey Lady. But the Bancrofts were said to have similar dreams last year, before they sold the Wall Street Journal to Rupert Murdoch and News Corp., a move that, in retrospect, may have saved the paper.
There may also be plenty of buyers for local newspapers. "In small markets, newspapers continue to be the dominant ad platform," says Philip Murray. His firm, Dirks, Van Essen & Murray, is currently involved in several deals with private equity firms and individuals looking to buy newspapers. Prospective buyers are betting that better days lie ahead for a business that sells information, a valuable commodity in any market. In fact, Murray says that while many local papers are experiencing single-digit year-over-year advertising declines, some of those serving farming communities or energy boomtowns are actually growing.
Uh oh, an argument in favor of the newspaper industry? Not likely. The big papers, at least, will be making headlines with lay-offs and dwindling revenues for some time to come.
Gotta sell those papers, after all.



READ AN ALTERNATIVE IHT DAILY NARRATIVE AT
A PLACE IN THE AUVERGNE

LOOKING FOR A CHRISTMAS BOOK GIFT TO BUY?
"Books about cosmopolitan urbanites discovering the joys of country life are two a penny, but this one is worth a second glance. Walthew's vivid description of the moral stress induced by his job as a high-flying executive with the International Herald Tribune newspaper is worth the cover price alone…. Highly recommended."
The Oxford Times

Amazon.co.uk


Amazon.com


For more reviews visit www.ianwalthew.com

Friday, 17 October 2008

Private equity for NYT to acquire, invest or be bought buy.



On the subject of Dubai, there is a big private equity industry shindig going on there at the moment (no all you can drink champagne brunches I hope).

Bottom line: lots of acquisition opportunities out there. Henry Kravis was there, but just for those that don't know, the other co-founder of his firm, James Kohlberg was elected to the Board of Directors of The New York Times Company in 2008. Mr. Kohlberg is another co-founder and has served as chairman of Kohlberg & Company since 1987.

Has Mr. Kohlberg got any 'Super Return' ideas for the NYT or indeed any other media ideas?


Did any senior IHT or NYT execs who attended the opening of the DMC last Sunday, stay on for the equity conference?



Private equity firms see a need to adapt
By Megan DaviesReuters
Thursday, October 16, 2008
DUBAI: Among the executives from the private equity industry gathered at a conference in Dubai this week, there was optimism about finding bargain investments amid the detritus of the global credit meltdown.
But there were also concerns about their own deteriorating assets and questions about whether the leveraged model of investing would bring the same level of returns as in the past.
Participants at the conference, titled "Super Return," included Henry Kravis, co-founder of Kohlberg Kravis Roberts; David Rubenstein, a co-founder of Carlyle Group; and Stephen Schwarzman, a co-founder of Blackstone Group.
"Despite aggressive steps by governments around the world," investors' and business confidence remains "shaken to its core," Kravis told the conference.
Loaded up with cash raised during a 2005-2007 boom period, buyout firms are reluctant to give it back to the pension funds and other powerful investors that allocated the money in more flush times.
Those investors want returns on their cash, and some are calling for a reduction in the hefty fees they pay. On the other hand, exiting investments through an initial public offering is not an attractive proposition because of the turmoil in equity markets, nor is it an ideal time to get a great price in any asset sale.
"It's going to be extremely difficult to deliver the kind of returns in the past when you're selling into a lower-priced environment," said Scott Schoen, an executive at Thomas H. Lee, the buyout firm in Boston.
There was also an elephant in the room: the pending stock market listings from KKR and Apollo at perhaps one of the worst times to go to market in history.
KKR has announced plans to go public this year through a complicated transaction that involves buying its publicly listed Amsterdam investment fund, delisting it from Amsterdam and relisting the new company in New York. Apollo, run by the investor Leon Black, filed in April to register securities, already traded on a private exchange, on the New York Stock Exchange.
At least neither listing relies on raising public cash, protecting them to an extent from a potentially embarrassing cut in offer prices to get the listings done. But the difficulty of being a publicly traded private equity firm is all too evident in the price of Blackstone shares, now trading at less than a third of their $31 IPO price.
For the buyout sector, some relief did come from the extraordinary efforts made by the United States and other governments to prop the financial system and struggling banks. The injection of government cash into banks could be the action that "breaks the back of the credit crisis," Schwarzman said.
Rubenstein said the actions could have the affect of freeing up leveraged buyout debt.
"My guess is the system will probably free up," he said, "and within a few months you'll begin to see buyout debt more readily available than it has been in the last nine months or so."
But ultimately, many agree that the industry must adapt, rather than bet on the hope that the availability of leverage will return to anywhere near previous levels.
"We should be looking at more transactions in which we partner with non-private-equity firms," Kravis said. "We should also look at a variety of investment options including mezzanine financing, even taking minority stakes in companies, as long as we have the ability to improve the strategy and operations of that company."
Mezzanine gained new luster as private equity firms found it harder to obtain the easier, cheaper lending options on which they had relied. This debt, typically exchanged for double-digit interest rates and a chunk of equity through warrants - or options to buy stock at a future date - is more expensive because it is unsecured and carries more risk should a company collapse.
Distressed assets are clearly among the most appealing.
Rubenstein is scouring the financial services sector. He said institutions like banks and insurance companies seeking to sell assets were probably going to part with them at distressed prices.
Looking ahead, private equity does seem to have history on its side. Various executives said at the conference that history showed that funds investing during downturns did better than those investing during better times.
Because pension funds have committed billions of dollars to private equity, many people will be hoping that these executives are right.
















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Thursday, 16 October 2008

Big Media. Bad Idea. (Portfolio.com)

Big Media. Bad Idea.
by Sophia Banay Oct 15 2008
Ask any shareholder not named Murdoch or Redstone—big media just isn't working


Say what you want about the benefits of synergies and size for big media companies; for their shareholders, the bigger the company, the smaller the gains. Between last week and the same week a year ago,Time Warner shares were down 50 percent; Viacom was off 59 percent; G.E. had fallen 46 percent; News Corp. slid 65 percent; and Disney, the big winner, had tumbled a mere 34 percent.Is it time to say "Enough already" with big media and the dead-as-disco idea Japanese giants such as Sony had about buying movie studios to sell their VCRs? How about small media? Or at least smaller media?
It sounds fairly logical. The supposed "synergies" between the divisions of modern conglomerates like Viacom, G.E., and Time Warner have never really blossomed. Time Warner's magazine group, cable networks, AOL, pay TV, and movie-studio divisions barely communicate, let alone work together. And if that lumping together doesn't deliver value in the stock market, why suffer through it?
Time Warner took one step toward unraveling those holdings last spring, with the spinoff of Time Warner Cable, which delivered shareholders over $10 per share in dividends. Before that move, long-awaited by analysts, the cable unit's success was never reflected in the larger company's share price.
AOL, by contrast, has had a disproportionately negative affect on the company's stock, leaving many investors wondering when a sale of the unit—or of the floundering magazine unit—will take place. That's a tough break for the company's better-performing assets, like Turner Broadcasting, home to cable hits like The Closer, and stellar studio Warner Bros., responsible for summer smashes like Sex and the City and The Dark Knight. Spun off independently, any of these properties could deliver substantial value to shareholders. As it is, the albatross of AOL is the only thing visible to anyone looking at Time Warner's stock price.
CBS is a similar story. Last week, it put Showtime content front and center in a new partnership with YouTube, offering the channel's most recent series premieres of Dexter and Californication to viewers for free. In doing so, the company, whose share price was down 72 percent from a year ago last week, is trying to capitalize on its marquee pay-TV brand to bring viewers and media attention to its shows online, where it will take in revenue from ads played at the start, middle, and end of its shows. But could CBS unlock the value of its increasingly shiny Showtime brand by spinning off the network into its own independent entity? The premium-cable channel is obviously feeling its oats, as buzzworthy original series like Californication, Dexter, and Weeds have led a 2 million jump in subscribers, to 16 million, over the past two years.Some analysts agree that Showtime, as a stand-alone stock, could be the secret weapon of CBS shareholders. On its own, "Showtime would probably be worth more than CBS today," says Porter Bibb, a managing partner at Mediatech Capital Partners in New York."It's hot, it has an interesting future, and it's making money with video on demand." Of course, not every premium pay-TV channel would perform as well as a stock. HBO, for instance, is probably better served—for now—by remaining a part of Time Warner, under intense pressure as it is to deliver hot, game-changing new shows with the frequency it used to, says Bibb.
But in general, if a media property is strong, it performs better outside of a conglomerate than inside one. Why keep a company's most valuable assets hidden inside a decaying shell? The Dolan family's Cablevision, which owns a slew of valuable cable networks through Rainbow Media—including the Sundance channel, IFC, and AMC, home to the breakout hit Mad Men—is another example of a media company whose stock is undervalued. Cablevision would do well to spin off some subsidiaries—or even just stop making new acquisitions. After paying almost $650 million for the paper Newsday, the company got very little back in terms of stock value.
G.E., which has been urged to spin off NBCU by eager analysts, no longer has that luxury with G.E. Capital suffering in the economic crisis. But should it do so in the future, the new company—made up of a movie studio and theme parks, with business models that are not advertising-reliant, plus a mature slate of cable networks with dual revenue streams—would likely perform well in the stock market. News Corp. and Disney are two possible exceptions to the big-media curse. Disney makes sure that ESPN programming on ABC, for example, is obviously marked as such, an effective cross-marketing tool. And News Corp. is steadily integrating Dow Jones' components, such as MarketWatch, into its daily operations.
But even the most skilled managers are overextended when trying to grapple with the various subsidies of their enormous conglomerates.
A(nother) case in point: YouTube has lost some of its tech-darling status since being swallowed up by Google. Perhaps that explains the new partnership with CBS, which aims to expand YouTube's niche from clips of cats falling from trees to more mainstream content like you'd find on Hulu.com. But can one mammoth media company save another?
"I don't believe in conglomerates from a financial point of view because they totally depend on having good management," says Bibb. "That's a tough thing to depend on."
In other words, don't count on it.




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TV Guide Sold for a Buck (Advertising Age)



TV Guide Sold for a Buck
SEC Filing: Buyer Got $9.5 Million Loan From Macrovision to Do Deal
By
Nat Ives Published: October 15, 2008 NEW YORK (AdAge.com)
How much is TV Guide magazine worth in a morphing media business and molten credit markets? Try $1.
That's how much the private equity fund OpenGate Capital has agreed to pay Macrovision for the unprofitable magazine and all its liabilities. The cover price, by way of comparison, is $2.99.
Take this magazine -- please.
To sweeten the deal even further, Macrovision is loaning OpenGate up to $9.5 million to help get going -- at a very friendly 3% interest. "I'd borrow from Macrovision any time," one investment banker said of the terms. The terms were not disclosed when Macrovision said Monday it had struck a deal with OpenGate, but emerged in a Macrovision filing to the Securities and Exchange Commission yesterday.
For Macrovision, the deal clears from its books a money-losing print magazine and its 3 million subscribers who need to be serviced.
Money pit
It acquired the title when it bought Gemstar-TV Guide for its digital assets last January. But the magazine lost about $20.3 million in 2007, according to Gemstar's 10-K filing for the year ended December 2007. Gemstar said in that 10-K: "We currently anticipate continuing, but declining, losses for the next two to three years." OpenGate believes it can turn the title's liabilities into profits. "The reason we acquired this business is simple," OpenGate managing partner Andrew Nikou told AdAge.com yesterday. "It needed additional investment. We're investing in this company to take it to the next stage." Macrovision is selling cable's TV Guide Channel separately.





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