Newspapers and Newsprint
By
by Ann Sosnowski
Every industry goes through cycles of boom and bust. The newspaper industry itself has been in dire need of higher circulation numbers and revenue, and may be about ready to redeem itself through joint ventures with online companies. Newspaper companies are finally bucking up to the fact that they need to recognize the increasing value of online readership and change their business plans to accommodate the world's viewing of news and current events.
But if you're interested in studying the inherent problems with the newspaper industry, they can be deduced through one perfect example: Tribune Company (TRB:NYSE).
It's been four months since Tribune put itself up on the auctioning block. With a lack of high bids, or even serious bidders, Tribune extended its bidding process past the cut-off date of January 14.
A few weeks ago, I spoke in a Taipan Financial News video how Tribune Company was a suicide stock for your portfolio. This was even before TRB decided to deny three motley bids because they weren't high enough. Tribune has denied the Chandler family's modest bid (they own the largest chunk of the Tribune), as well as a bid by Los Angeles billionaire investors Broad and Burkle.
As I stated in my Taipan Financial News video about Tribune, their ownership of the Chicago Cubs baseball team is their biggest asset, and now they've finally come around and started taking advantage of it.
Tribune is in talks with private equity firms and is considering spinning off its television stations and its baseball team. Sale of these assets (although they won't make up for the $5 billion worth of debt the company currently owns) is at least a step in the right direction if the company wants to stay in the newspaper industry at all.
The Carlysle Group's bid for Tribune's broadcast business at a price of $4 billion is the only offer still standing following the recent bidding circus. Tribune may be taking its whole newspaper business private.
As with many industry downfalls, one problem can create many. The lack of revenue and circulation plaguing the newspaper industry is also plaguing the newsprint industry.
In an approved merger, Abitibi-Consolidated Inc. (ABY:NYSE) a newsprint company from Canada, and Bowater Inc. (BOW:NYSE) of South Carolina are combining in an all-stock deal. The new entity will be known as AbitibiBowater Inc.
Revenues for the new entity will be $7.9 billion with a market cap of $2.4 billion. Both companies were getting the short end of the staff due to the dropping of bulk sales and the general decline in newspaper production. These two companies will now be more efficient in terms of production, sales, and costs now that they've banded together.
It also makes the new company one of the world leaders of recycled newspapers and magazines and North America's third-largest paper and forest products companies.
This is much more advantageous for ABY, whose stock trades at less than $4 per share, compared with BOW that trades for less than $28 per share.
Last week, I interviewed with Bob Gourley on his show Issues Today on a radio station in San Pedro, California. We talked extensively about the lifecycle of the newspaper industry.
He asked me one interesting question: Do you think print newspapers as we know it are going to be wiped off the face of this planet?
Here's how I answered him: I believe that smaller newspapers, with specialty leanings, and especially magazines, will continue to do well. However, larger newspapers need to come to terms with the fact that most Americans will continue to stop reading the newspaper that lands on their doorstep. We're just too technologically advanced for that.
That's why the companies that really take declining circulation seriously, and start working with online companies, making it more comfortable for readers to view news online, will be the true winners of this shakeout.
In that vein, this merger between Bowater and Abitibi will be much more advantageous for them on the magazine side of the business, than the newspaper side.
But I wish them continued success for realizing a problem existed and in turn, combining to combat it together.
But enough of this newspaper talk… I want to tell you about the newest micro-cap company I've discovered…
It's a medical device company that focuses specifically on heart monitoring.
It's no secret that cardiovascular disease is the number-one killer of Americans. This small $2 “modern medical miracle” company will gain at least 500% as it races to prevent cardiovascular disease.
The company already has three products in the hopper: one ECG vest, one credit card-sized personal heart monitor, and an objective evaluative system for ECG data recorders.
Just the other day, this company gained a $10 million credit facility to ensure that it gets these lifesaving products to market.
I've already issued this recommendation to my Diligent Investor MicroCap Hot Sheet subscribers, and it's up 31% in less than two weeks. But as I said, I anticipate gains of at least 500%, so it's not too late to still get in.
You can learn more about this company by viewing my most recent video concerning it on “Smart Trading with Laura Cadden.”
Enjoy!