A Question of Value

On the West Coast last week, three weekly newspapers * changed hands. But they were an exception to a trend. Elsewhere in the U.S., scores of would-be buyers were hunting dailies or weeklies for sale--and hunting in vain. In Florida alone, one broker reported he had 25 buying offers, not one to sell. In Michigan, ex-Senator Blair Moody, who had lined up capital for a daily (TIME, Aug. 17), had not been able to find one to buy. The reason: newspapers in general are making fat profits, anywhere from 6% to 15% after taxes. Few owners want to sell, and those who do demand top prices.

What Price? Are the asking prices justified? Nobody knows, because nobody really knows how much any newspaper is worth. Determining one's value is as tricky a problem, as one broker puts it, as "trying to figure out a woman's age from a sample of her handwriting." Even the brokers, who make their living by judging values and chasing newspaper sales, have never been able to work out any rule of thumb to fit all cases.

The difficulty is that only part of a newspaper's value is made up of tangibles like real estate, plant, equipment, etc. A large part of it is an indeterminate thing the brokers call "future potential," and an equally elusive asset known as "good will" -- an estimate of the paper's standing in the community, faithfulness of readers, competitive position, relations with advertisers. Determining the value of a newspaper is such a tough job that the Bureau of Internal Revenue has an expert, John A. Grimes, who specializes in it (to settle inheritance-tax disputes, etc.). But the best Grimes can do is simply to get various informed estimates by brokers, and weigh any visible measure of value (such as stock, circulation, ad revenues, etc.).

Nevertheless, newspaper brokers have worked out a number of complicated formulas--always subject to special exceptions--on which they make rough guesses. Sample formulas: the worth of the physical plant plus two or three times the net profit after taxes; the plant plus $10 to $20 for each subscriber; gross receipts plus 20% for good will. But even when they apply any or all of the formulas, brokers like Washington's Allan Kander admit that after they get the result, they "dive for a crystal ball." And the formulas cannot account for the huge increase in values represented by some of the sales that have taken place. In California's San Bernardino County, the publisher of a semiweekly, which he bought for $85,000 in 1949, had five bids to pick from when he sold it three months ago for $175,000. One triweekly in the same fast-growing area went for $25,000 ten years ago, and this month the new owner turned down offers ten times as high.

Secret Deals. Almost any week, Editor & Publisher carries several ads from would-be newspaper buyers, but most newspapers are not sold that way, because even publishers who might sell are seldom willing to admit it. Any rumor that a newspaper is on the block makes employees jittery and causes advertisers to fear that the paper may be declining (three years ago the New York Herald Tribune asked the state attorney general to investigate persistent rumors that it was for sale). As a result, most negotiations are conducted in strictest secrecy.

The brokers themselves earn an average 5% commission. Manhattan's Vincent J. Manno. 41, one of the most active brokers in the U.S., earned a fee close to $150,000 on his biggest sale--the Portland Oregonian and its radio station for $5.6 million. The brokers often chase 30 to 40 unsuccessful deals before concluding one. But sometimes they can also create deals where nobody had thought of selling. Manno was called in last year to evaluate the San Jose Mercury and News for its stockholders, who wanted to know what their holdings were worth. When he named the figure, they authorized him to find a buyer. Manno had one on hand: the eleven-paper .Ridder group, which was willing to pay a big price because of the great growth potential of the area. The Ridders guessed right. They have already increased the paper's profits 30%.

*The Sierra Madre (Calif.) News, the Kelso (Wash.) Kelsonian Tribune, and the Dunsmuir (Calif.) News.

This file is automatically generated by a robot program, so reader's discretion is required.