M&A Activity: More Good Headlines for the Newspaper Industry
By Ann Sosnowski
In this article
Dow Jones if officially mulling over Murdoch's bid… and is entertaining others.
Again, the news of Dow Jones acquisition puts faith into the newspaper industry that dual-class share structures could be coming to an end.
News Corp., as a large entity obsessed with acquisitions, is a good long-term buy.
M&A Activity: More Good Headlines for the Newspaper Industry
Finally! The Bancroft family of Dow Jones Company (DJ:NYSE) fame has finally voiced publicly that it will consider News Corp.'s (NWS:NYSE) $5 billion bid.
Originally, Rupert Murdoch bid $60 per share for DJ, but analysts are suggesting that he may raise it to $70 per share to appease both the Bancroft family and DJ's shareholders. Additionally, the company is entertaining the idea of taking other bidders up on their offers if they're good enough.
Of course, we saw the same action with Tribune Company (TRB:NYSE) which took nearly five months to pick a buyer out of its exorbitant amount of suitors. We all know the end of the story: TRB ended up in the hands of private equity billionaire and real estate investor Sam Zell, who has no experience in print media.
Murdoch was first reported to be bidding for DJ on May 1, 2007 at the aforementioned $5 billion price tag, a 65% premium over the company's worth. Not only did DJ jump to almost $60 per share that day, but so did other newspaper stocks.
The resurgence of the newspaper industry combined with the overarching arm of merger and acquisition activity is finally hitting the newspaper industry. Most know that the newspaper industry is doomed to fail if the companies don't come into the 21st century and begin acting as larger media companies. If the 125-year hold that the Bancroft's have held on the Dow Jones Company is finally coming to an end, it gives much hope to other newspaper companies' stocks that have also been decimated through dual-class share structures.
Of course, shareholders hold nothing but optimism regarding a possible paradigm shift that puts more power into their hands, instead of, I'm being honest here, crotchety old men.
M&A Activity: Dow Jones Bid Lifts Newspaper Industry… Again
One of those stocks is The New York Times Company (NYT:NYSE) which I've been extremely bullish on since late last year, mainly on the premise that it has the perfect business plan to sail smoothly into online advertising, compared to other stoic newspaper entities.
(Just recently, NYT was upgraded from “underweight” to “neutral” by JP Morgan.)
NYT is currently controlled by the Sulzberger family, and shareholders have been extremely reactionary by refusing to cast votes for new board members to show that they want more power than the “godfathers” are giving them.
On the news that DJ could actually take Murdoch's bid, or something higher by another party, DJ jumped again to $60 per share. DJ is valued at more than 65% than it traded at the end of April 2007.
As it happened on May 1, it happened again: all newspaper stocks are up, a gain across the industry of 2.34%. NYT jumped on a gap to a high of $26.26 per share, the second best gainer in the industry below DJ.
First we saw Tribune go private, now we might see DJ. Through simple observation, NYT may be next.
M&A Activity: Acquisition Companies Are Perfect Investments
On the other side of this deal is News Corp. (NWS:NYSE), one of the modern kings of M&A activity. Besides attempting to buy Dow Jones, News Corp. has acquired two New York newspaper groups (TimesLedger and Courier-Life), IGN Entertainment, Intermix Media Inc., Capital International Inc., as well as a few more acquisitions, including Fox Entertainment Group (which has had its own acquisition activity) since 2005.
Since 2005, acquisition activity has treated NWS well, adding to its longer-term profits. NWS is up 35% since 2005 to its high.
Over the long term, NWS offers great forward potential as a play of continued acquisition activity. Companies that grow both organically and inorganically are strong candidates for investment.
Of course, my favorite company that's following up what I call a “gobble-up” plan by acquiring little companies in its health-care niche, is another great investment.
The stock was up 100% in four months before splitting two-for-one in January.
I anticipate 80% gains on it in the next seven months.
I truly believe that M&A activity is one of the must-have trends to follow in your portfolio this year. Diversifying your portfolio across stocks that not only acquire other companies, but that are acquisition targets themselves, as well as buying the stock of the boutique investment houses making these deals, is the best three-prong way to really get the biggest bang for your buck.
Not only could you make 80% gains in the next seven months on my favorite acquisition companies, but the rest of the “M&A portfolio” I'm recommending could return you gains of approximately 246%.
In the next few days, you'll receive an extremely important notice explaining why the M&A activity this year is set to beat the previous record, and we'll let you know all the simple ways you can capitalize off of this trend.
Don't miss out!
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Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.
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