Pizza or possibilities as former Fairfax papers go on the block

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With potential bidders being lined up in what might be only a three-horse race, there's more to Nine's divestment of the former Fairfax Australian Community Media than who buys the mastheads.

Macquarie Capital has apparently been charged with the responsibility as Nine looks for a buyer or buyers for the 170 publications and related websites.

News Corp's The Australian reports that private equity fund (and Pizza Hut owner) Allegro, Anchorage Capital and Platinum Equity are "most likely to express an interest" when information memorandums become available later this month. Nine is reported to want a swift sale, not least because the effect of drought across much of NSW has already brought down likely offer prices.

In 2016, News paid APN News & Media (now HT&E) $36.6 million - about two years' earnings - for a string of community newspapers which geographically complements both the Fairfax mastheads now on offer and the ones in APN's "patch" News already owned.

This is part of the key to this year's Nine offer: That the Fairfax community papers cover only one major part of regional Australia, while most of the remainder belong to News. Conveniently, and in the interests of avoiding the costs of competition, territorial overlaps have been largely avoided over the years, in some cases by "swapping" titles.

A serious Australian regional publisher would want whole-country coverage, which would mean News selling at least some of its share of regional Australia to the successful bidder, something which has already been flagged. I'm naïve enough to believe that Rupert Murdoch would not be allowed to buy the former Fairfax regionals, but anything is possible, especially ahead of federal and state elections.

We'll avoid discussing the political implications of a sale, but mention - as The Australian does - that the new owner would likely look to the Fairfax metro unit (and Nine itself) for an agreement on content sharing.

There is also, for as long as printed regional and community newspapers remain good business - which may be a while yet - the issue of printing them. Especially in Victoria, regional print sites are intertwined with both production of their local mastheads and also of the former Fairfax metros. Production of Fairfax's The Age is at Ballarat, where a plant upgraded under Bob Lockley's rule prints the seven-day masthead - with some help from Wodonga - as well as each city's "local" (The Courier in Ballarat and the Border Mail for the twin-cities of Albury and Wodonga) plus a raft of other titles including dailies.

Capacity-sharing momentum of the sort seen in Brisbane and Sydney - where News now prints the greater part of the Fairfax print load (including the Sydney Morning Herald) allowing the closure of plants in Ormiston and Newcastle - is largely stalled in Melbourne, where News has declared Fairfax's Ballarat site too remote for its needs. Expect a logical resolution of this problem.

Would it be churlish to also point out that the bricks-and-mortar assets of newspapers have historically been attractive to private equity firms? Note the regional market in the USA - where "consolidator" MNG Enterprises (which owns Digital First Media) is currently engaged in a hostile bid for USA Today publisher Gannett.

The successful bidder for the former Fairfax Australian Community Media would expect to recoup a chunk of its outlay by selling real estate it might gain in a string of growing regional cities, not least in the Canberra "suburb" of Fyshwick.

The US model - see our update, Sorry, sad or strategic: How US papers are changing hands - also shows how smaller "independent" publishers in regional cities have been growing their clusters of titles lately. Both by acquisition, and organically, as in the case of wide-awake independent Community Impact, which is currently moving in on Gannett's Nashville heartland while making a date with Houston.

These are encouraging signs, and there are more. Check out the family-driven growth around Allied Press in New Zealand and indeed, Fairfax's (now Nine's) own Stuff, as examples of what lively and alert management can still achieve in the newsmedia, and indeed the newspaper industry.

What Nine picked up with Fairfax Media goes far beyond these regional businesses - some of which had been collected within Rural Press ahead of its ill-starred merger with Fairfax more than a decade ago - but it is understood Nine chief executive Hugh Marks is looking for a quick sale, promising an update on February 21.

That is likely to mean cheap, leaving the "successful bidder" to tease out the value in its acquisition, and look for new synergies. In the case of Allegro -recently active in retail - might that be in real estate?

Fairfax Australian Community Media is producing EBIDT of around $57 million a year, and with talk of a sale at $80 million that could represent an even bigger bargain than the one News picked up with the former APN regionals.

So it could be fast food and a pizza with your paper... or does one of Australia's more ambitious independents have the confidence to make a move?

Peter Coleman

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