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September 13, 2006

NY Times Selling Its TV Stations

New York Times (NYT) announced that it is selling its TV station group. The group contains nine stations that management says will produce $43 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in 2006. Recent transactions in TV have been around 13x EBITDA, potentially creating proceeds of $560 million. In the past, management has noted these stations have a low cost basis, so after-tax proceeds won't likely be that high.

The station group represents around 5% of NYT's total business, so this is a marginal deal. Analysts will like the fact that they are eliminating a slow growing business facing secular challenges. The digital businesses immediately grow as a percentage of the overall pie. Analysts will also be pleased that NYT management can be more focused on its most important operations.

I am pleased to see the divestiture announcement, but I don't think it represents a signal to get long NYT. The challenges in newspapers are too high, and signs of a cyclical pickup in advertising remain nonexistent.

Posted by Steve Birenberg at September 13, 2006 12:59 PM in NYT