Seeking Alpha

Newcastle turns higher as deal details are presented

  • What's Newcastle (NCT +3.5%) doing buying a newspaper company? The stock reverses an early dive on news of the Local Media acquisition and turns higher following the release of the investor presentation.
  • Newcastle notes the purchase was made for 3.4x of 2013 EBITDA with an expected levered yield of 25% in year 1 and 30% in year 2. The company also comes with $33M of appraised real estate value - backing that out means the purchase was for 2.5x 2013 EBITDA, with large urban peers trading at 4.0x-5.5x.
  • NCT is considering the spin off Local Media and GateHouse Media into a new public company, "New Media" (as part of the deal, Newcastle converted its debt holding in GateHouse into a 59% equity stake). New Media intends to pay out a substantial portion of its free-cash flow in the form of a dividend with expected yield of about 20%.
  • "With industry distress comes buying opportunity ... once trading at 10x EBITDA, we believe we can buy local newspapers and directories at (fractions of that valuation)."
  • The conference call remains set for 2:30 ET.
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Comments (1)
  • Michael Bryant
    , contributor
    Comments (5744) | Send Message
     
    The next Liberty Media (LMCA)?

     

    20% yield for spinoff??????????? That's like (CVRR)'s yield.
    4 Sep 2013, 10:43 PM Reply Like
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