Once upon a time it was enough for the rich and famous to appear in newspapers. Now, it seems, they need to buy one (or at least ensure their people let it be known they are interested). A growing list of rich US businessmen have lined up as potential saviours for struggling newspaper groups.
Eli Broad, a real estate magnate, and Ron Burkle, who built a fortune in supermarkets, are bidding for newspaper group Tribune. Entertainment mogul David Geffen has signalled an interest in its flagship Los Angeles Times title. Jack Welch, former General Electric chief, is looking at the Boston Globe. Hank Greenberg, former AIG chairman, is reportedly sniffing around Tribune.
There could be an element of bottom fishing; after all newspaper valuations have been heading in one direction for a while. But that does not necessarily make them dirt cheap – given tough circulation trends, the migration of advertising online and the regular upwards drift of cost bases in the absence of aggressive action. The hope is that certain buyers, like those who covet sports teams, are not focused purely on financial returns. Power and influence, maintaining a healthy local newspaper, or simple vanity, can be powerful motives.
Even those high up the rich list must think hard before bidding aggressively on a company whose enterprise value tops $10bn. But, with debt markets willing to lend a large portion of the cash required, they add a welcome source of competitive tension to the Tribune auction. After all, strategic buyers, such as Gannett, would be brave to double up their newspaper exposure at such an uncertain time. And private equity has so far shown discipline when bidding for newspapers, given the industry’s challenges. The test will be whether trophy hunters, when it comes to it, really are willing to accept a lower return than purely financial buyers.