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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