Yesterday, while fellow Fool contributor Brian Gorman was writing his take on Tribune's (NYSE:TRB) 2004 financial results, two of the media company's competitors were preparing to get hitched. Lee Enterprises (NYSE:LEE), owner of newspapers from Washington state to New York state, said Sunday evening that it plans to buySt. Louis Post-Dispatch publisher Pulitzer (NYSE:PTZ) for $64 per share in cash.
This is a big deal in the newspaper business: Lee says that it will boost its sales by 60% and its circulation by 50%. Its combined circulation, the company said, will be the seventh-largest in the United States, with 1.7 million daily readers -- and 2 million on Sundays -- spread across 58 newspapers in 23 states. (The Post-Dispatch is Pulitzer's flagship publication, but the Arizona Daily Star is another notable member.)
Pulitzer's shares didn't move much on the news, and that's not surprising, given that the company's desire to find a suitor was well-known. Back in November, fellow Fool Tom Taulli wrote up the company's plans to bring in Goldman Sachs to help it find a taker.
Expect to hear more merger-and-acquisition news coming out of the newspaper sector. Market watchers generally considered 2004 upbeat for the advertising business, which has been in a dismal state in recent years. But the market is still a slow-growth one fraught with challenges -- particularly for newspapers. (Nathan Slaughter's January take on E.W. Scripps' (NYSE:SSP) results is useful background reading.)
Many newspaper companies simply don't need the kind of access to capital that the public market provides. They grow slowly, but they're also generally profitable and financially self-sufficient -- just the kind of thing that acquirers, whether in the form of other public companies, private publishers, or private equity firms, like to look for. Pulitzer's a perfect example.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
