Who owns America’s newspapers?
In January, I detailed how a hedge fund named Alden Global Capital, which played a role in the shakeup at MediaNews Group, also had significant holdings in newspaper groups Freedom Communications, Philadelphia Newspaper Holdings, Journal Register Company, Tribune, and the Canadian newspaper firm Postmedia Network — all firms with current or recent bankruptcy status.
After noticing that Alden also owned, as of December 31, 3.91 percent of Gannett’s common stock, I surveyed all of the U.S. public newspaper companies to see whether Alden pops up elsewhere as well. It turns out that, other than Alden’s stake in Gannett, there’s little crossover between the principal investors in the public companies and those that have picked up the “distressed opportunities” created by trips through bankruptcy court.
First, here’s a set of slides detailing the top investors in each of the publicly-owned newspaper publishers. I’ve included among these News Corporation (both the class A and class B common stock), but for the rest of this analysis, News Corp. is excluded because its global multimedia holdings in film, television, magazines and book dwarf the entire rest of the American newspaper business. (Note: All holding and valuations throughout this post are as of December 31, 2010.)
Note that these lists include both institutional investments (banks, pension funds, hedge funds) and mutual funds (pooled investments owned by individuals or corporations). Either way, the listed investor can vote the shares and in theory could influence strategy — but without board seats real influence is minimal. Most of these investors are looking for growth or dividends, not operational involvement.
What stands out on these slides is that, with a few exceptions, ownership is diversified to the point that no single entity owns more than 10 percent. The exceptions are noteworthy but are longstanding stakes that don’t point to the kind of financial restructuring that Alden and others are signaling in the private post-bankruptcy sector of the business. The entire 10-percent-plus club consists of:
Which investors are making the biggest bets in the newspaper business? To find out, I aggregated and ranked the total newspaper holdings of all of the top investors in each company. Here’s the result (leaving out News Corp., as noted above):
Berkshire Hathaway‘s Washington Post Company holding, it turns out, is the biggest single investment in U.S. newspapers, with a current value of $759 million. Not far behind, though, is Vanguard, with $703 million invested through a variety of funds in every public newspaper company: Washington Post, A.H. Belo, Gannett, Journal Communications, McClatchy, New York Times, Scripps, Media General, and Lee Enterprises. If this were one big company, Vanguard would own 6.74 percent of it.
As Wall Street investments go, though, Vanguard’s across-the-board bet on newspapers is smaller than a rounding error — it has $1.4 trillion in invested assets, so its newspaper holdings are about 1/20th of a percent of its investments. And, to put the U.S. publishers in perspective versus the News Corp. juggernaut, Vanguard’s investment in News Corp. alone is worth $2.5 billion.
After Berkshire Hathaway and Vanguard, the list drops quickly to smaller investments by JP Morgan Chase ($543 million), Ariel Investments ($497 million), and BlackRock ($335 million). (BlackRock, with $3.6 trillion under management, is the world’s largest money manager and the sixth-largest owner of Gannett stock.)
A few names do cross over between the “distressed opportunities” investors I listed last month and those with some holdings of public (and not-quite-as-distressed) newspaper companies. They include:
Generally, at all of these companies, the total institutional/mutual fund ownership is between 60 and 90 percent; insiders hold no more than single-digit percentages in the aggregate.
Conclusion: While Alden and others, using MediaNews as a base of operations, may be looking to engineer some mergers, consolidations, and realignments in the distressed sector, they don’t have a significant enough toehold in the more stable public sector to have a similar impact there. That doesn’t preclude the possibility of wider strategic moves beyond the potential for a MediaNews/Freedom combination (and perhaps other mergers or trades involving Tribune and Journal Register) — but they will have to result from persuasion rather than clout. MediaNews executive chairman Dean Singleton, in his new role as strategic dealmaker, will be one voice trying to do the persuading.