Don't you hate when someone else beats you to an entry? Mike Fourcher, who writes at Vouchification, has done a bang up analysis of the value of Creative Loafing (the publisher of the Chicago Reader). It is a must read. I wish I'd written it.
When you're talking about a range of values, as Mike is, I don't think the few nitpicking points I'll address here detract from the overall substance of the piece. Nonetheless:
- Mike used a value of 9X EBITDA from a 2002 discussion of the value of an Alt Weekly. It is likely that old-line media was near the height of its value in 2002. So, this is more a ceiling value than a real value. Mike goes into more realistic values as he continues his piece.
- The Liquidation report used by Mike used figures from March. There is also a note that the report was issued in December (maybe it was updated?). In any case, the report uses figures that are several months out-of-date.
- EBITDA should probably be averaged over a period of time that includes a full business cycle. Using this one year, probably the worst year in the firm's history, depresses the value.
Mike's value, a lot less than it will take Atalaya to win the bid. Read it to find out his ideas.
As a final note, The Boston Globe, a daily newspaper with some characteristics similar to the Chicago Sun-Times (but not the Sun-Times Media Group) received a bid of $35 million. The Globe, which is currently owned by the New York Times parent, is the leading paper in Boston, unlike the Sun-Times, which trails the Chicago Tribune in circulation.
Discuss
LOU GRANT, 08-11-2009
Hey Mike,
I tried to add the comments. I can't sign in. I'll try again. This was really nice work you did. As noted, you presented a range and a reader will understand the value of CLI as a result.
It is worthwhile reading and having done similar work, I can understand how long it took you to do it.
Your final note there that Eason destroyed $7 million in value is worth emphasizing. I'm reading his comments about how his experience is essential to an ongoing company. What planet does he live on? Too bad he's lost his investment. What about the investments of Atalaya and the other creditors? What about the lives being held in limbo, the workers at CLI? I'm in a mood to kick all the rascals out today. The end of the month should see new management at the Reader. That's a good start.
MIKE FOURCHER, 08-11-2009
All good and valid comments, Lou. If you can, I'd love to see them in my blog comments. Here's my answers/thoughts:
1. The point of using the '02 9x multiplier was to show what kind of ceiling - and dream price - a seller might get from their paper. Context.
2. I'm no bankruptcy lawyer, but from what I can tell, only one set of numbers are released during the bankruptcy process, and that's at the beginning. When a company enters bankruptcy it undergoes a kind of receivership until it exits proceedings, and any serious market changes or significant management changes require court approval. In short - these are the numbers we've got, so we have to extrapolate.
3. You're right about extrapolating the average EBITDA over time - usually it's three years. But stability is the key word here, and while 2008 might have been CLI's worst year - are we so sure that 2009 won't be even worse? This is an argument between Eason and Atalaya's attorneys. Adding 2006 and 2007 would raise the average EBITDA, but would it truly reflect market conditions? Atalaya has argued that because 2007 and 2008 numbers are markedly different, Eason is responsible for destroying $7 million of value in one year.
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