HEARD ON THE STREET: Holders Besiege The Sun-Times [Wall Street Journal]
Summary: Three years ago shareholders at Sun-Times Media Group Inc. launched a successful campaign to oust then CEO Conrad Black; now they've decided they want the company sold. Since selling its prized Telegraph Group (London) in 2004, SVN has delivered a string of weak earnings reports, and expects weak Q3 numbers, causing a prominent shareholder to comment, "The board has not acted with sufficient urgency." Shareholders say the time for selling is ripe: (1) The possible sale of Chicago Tribune has investors focused on the Chicago market. (2) Private equity groups have been showing increased interest in newspapers. (3) Last week Dow Jones & Company Inc. sold 6 community newspapers for $282M, and GateHouse Media Inc. had a well received IPO. Sun Times looks relatively cheap: (1) Most newspapers have a far greater enterprise-value-to-revenues ratio than SVN, whose enterprise value (stock + debt - cash) is a fraction of its revenues. (2) At $5.80, the current price is way below the $18 secretly negotiated between Black and a U.K. buyer in 2003 (the deal was blocked after the board sued). Downside: (1) $500M in potential tax liability, of which it's unclear how much the company will actually have to pay. (2) While Black, who still owns a majority voting stake, agrees the company has underperformed since he left, he doesn't think it currently makes for an attractive purchase target, citing the "legal mess" that surrounds the company (including a lawsuit/counter-suit between him and the company -- shareholders say he looted SVN, he accuses the board of libel). Current CEO Raymond Seitz said in a statement the company has implemented a cost-reduction program to take "into account the realities of the newspaper advertising marketplace, which has continued to decline over the course of this year," but would not comment on shareholder pressure to sell the corporation.
Related links: Sun-Times Publisher Enduring `Tough Year' [Chicago Tribune] • Sun-Times Plunges After Warning of Ad Cutbacks [MarketWatch]
Potentially impacted stocks and ETFs: Sun-Times Media Group Inc. (SVN), Tribune Co. (TRB), Dow Jones & Company Inc. (DJ), The New York Times Co. (NYT)
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