The economics of going private: If the predators are willing, perhaps their bankers are too weak

The hysteria-fuelled bear market in newspaper stocks has been accompanied by talk of private equity interest in the sector.

In the US, the newspaper executive turned VC Alan Mutter has been thinking about the economics of taking newspaper groups private.

The same logic could be applied to both Trinity Mirror and Johnston Press, whose share prices have taken a massive battering in recent weeks.

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The mention of private equity brings Mark Potts out in goosebumps.

These once-great companies are bottoming out. The sharks are circling. The horrors of the next few months may make the last few months look like a golden age – except to savvy investors who try to wring the last few pieces of gold out of those downtrodden newspaper companies.

All of this talk incites Jeff Jarvis to say that he wouldn’t “invest a dime in an old newspaper company, no matter how cheap”.

Jarvis goes on to hint that the share price decline has continued for so long precisely because private equity investors are avoiding the sector. Far better, he suggests, to wait for “some of the giants [to] topple, leaving holes in the ground that’d be easier to fill from scratch”.

This exchange underlines perfectly the will-they-won’t-they debate about taking newspapers private.

Some believe that the predators are biding their time, waiting for the market to bottom out. Others believe that most of the big private equity groups have written off the newspaper industry.

Instead, they’ve been investing aggressively in B2B publishing, where the route out of structural decline seems more clearly signposted. (Not that the anonymous author of B2B Media would agree.)

Mention of this brings to mind a second constituency of doubters, who worry that private equity groups won’t be able to raise enough cash.

This is speculative territory. At the FT, as elsewhere, hacks hold diverging views. At Alphaville, for example, Paul Murphy tends to think that private equity groups can still access the debt required to do big deals.

But only this morning, Ben Fenton and Martin Arnold are suggesting that a 506p private equity approach for Informa will fail. In the words of one anonymous source: “They are struggling to get it financed”.

Does private equity intend to bid for newspaper assets? Can it raise the cash? As the waiting game continues, tempers are becoming frayed in a bear market that’s starting to show its true destructive potential.



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