Sun-Times Media Group, Inc.
(NYSE: SVN) shares rose over 15 percent after the company announced
that it has begun an evaluation of strategic alternatives to enhance
shareholder value. Specifically, the troubled Chicago media company is
seeking a joint venture or outright sale of the company. The news comes
as no surprise to many as activist shareholders have been pushing the
company towards a sale for some time. Shareholders are hoping that the
move will help unlock value after more than an 80% decline in value.
“Sun-Times Media Group is very fortunate to have a solid portfolio
of publications and websites that deliver the highest quality
journalism to the communities we serve and great value to our
advertisers. The steps that we’ve taken in the past year are designed
to make sure that this is true today and will continue into the future.
Our Board’s decision to explore strategic next steps now is the right
thing to do to ensure the future of the Sun-Times Media Group
publications and Web sites and to generate the highest value for our
shareholders.” said Cyrus F. Freidheim, Jr., Sun-Times Media Group
Chief Executive Officer.
Sun-Times Media was pushed towards a sale by many investors
predominantly led by K Capital Management, which owns nearly 10% of the
firm. The hedge fund believes that the company owns very attractive
community newspapers but is too small to operate as an independent
public company. That is, the costs of being a public company greatly
outweighed the benefits in this case due to the firm’s small size. As a
result, the assets have moe value to a buyer than they do as an
independent company and a sale was the best option available.
Sun-Times began to cut costs two months ago in order to make itself
more attractive to a buyer and succeeded in saving $50 million. The
company’s strong portfolio of newspapers should make it attractive to
an outside buyer, but many fear that the declining newspaper industry
and tight credit market may preclude any super-favorable sale from
taking place. After all, it would be difficult to find a financial
buyer in today’s market that would buy a newspaper company. However,
there are plenty of strategic buyers that may be interested and that’s
what everyone is banking on.
In the end, it will be interesting to see if a transaction will take
place. We should begin to at least see the level of interest over the
next month as the company works to find and organize potential bidders.
Combined, these factors make this company one that is definitely worth
watching over the next few months!
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