Lee Enterprises Pays $694M for Howard Publications

An Iowa-based newspaper company has become the newest player in San Diego media, having bought the North County Times and the rest of Howard Publications' collection of small newspapers for $694 million.

Lee Enterprises, Inc. announced its purchase of the Howard papers Feb. 12.

For the

With adjustments that include $50 million in cash on Howard's balance sheet, the purchase price becomes $694 million.

The sale is expected to close in April.

The deal was first broached 18 months ago, said Dan Hayes, a spokesman for Lee, which is based in Davenport, Iowa. CEO Mary Junck was not available for interviews.

According to Hayes, the Howard family approached Lee, offering to sell them their papers.

"They were looking to consider leaving the business," he said of the Howards.

However, "the timing was not right then" for Lee, and talks did not progress, Hayes said.

Negotiations began again last summer, he said.

Howard Publications is a Delaware corporation with headquarters in Longview, Wash. South Coast Newspapers, a wholly owned Howard subsidiary that owns the Times, is based in Escondido.

Bill Howard, who operates Howard Publications, was not available for comment.

According to the Audit Bureau of Circulations, the North County Times' most recent audited report, which covered 2000, showed that the paper had a daily average circulation of 94,456 during the week and 95,749 on Sundays.

A more recent publisher's statement, which has not yet been audited, said that the paper's circulation was 89,346 during the week and 90,275 on Sundays, for the six months ended Sept. 30 of last year.

According to Steven Barlow, an analyst for Prudential Securities who covers Lee Enterprises as well as the publishing and advertising industries, Lee has a reputation for increasing newspapers' revenue.

"What I've seen them focus on is what they can do to increase the circulation, to get new advertisers into the newspaper and increase the frequency of current advertisers, and really focusing on the communities and growing as properties," Barlow said, "vs. just harvesting the cash from them."

According to Times Publisher Dick High, no changes are being made at the paper to prepare for the new owner.

"What we're doing right now is basically talking to everybody and sort of making everyone settle down and let them realize that this is the purchase of an ongoing business with few changes expected," he said.

From what he can tell, High said, the Lee executives are "quite pleased" with what's happening at the paper.

"I'm sure there will be some changes in operations and various things, but in terms of what the public would see and what advertisers would see, I think it would be pretty seamless," he said.

Layoffs are not planned at this time, High said. "They're quite clear that everybody starts off as employees," he said. "There's certainly initially no layoffs or anything."

Barlow doesn't expect layoffs. "They do not have a history of going in and slashing and burning at all," he said of Lee.

Barlow's not ruling out any layoffs, however.

"It's a new owner, and the owner's going to assess each of the papers and their margins," he said. "They've got to assess little by little."

Lee currently owns 23 dailies, a joint interest in five other dailies, more than 100 weekly newspapers, shoppers and specialty publications, and associated online services.

The company owns mid-size publications, between 30,000 and 125,000 in circulation and is publicly traded on the New York Stock Exchange. As of Feb. 14, Lee's stock was trading at $36.03.

In March 2000, Lee announced it would move away from its second focus at the time: television stations. It owned nine network affiliates and seven satellite stations, Hayes said. The stations have been sold since then.

According to Barlow, Lee's focus on newspapers was a smart move.

"The decision to sell the television stations was based on that they were too small a player in the television business and, frankly, their operating margins in TV were not as good as the rest of the industry," he said.

Barlow said the TV stations were valuable assets and desired properties because of the scarcity value.

"I think it made sense to sell what you're not very good at and concentrate on what you're good at," he said.

Barlow said the Howard purchase was "the end game" of Lee's newspaper-focus strategy. Since announcing the plan almost two years ago, the company had made smaller acquisitions. The after-tax proceeds of the TV holdings had simply been sitting in a bank account, Barlow noted.