NEW YORK, Oct. 27, 2006 (PRIMEZONE) -- Dow Jones & Company (NYSE:DJ) announced a definitive agreement to sell six of its community newspapers to Community Newspaper Holdings, Inc. for $282.5 million in cash, subject to a working capital adjustment. We expect the after-tax proceeds to be approximately $268.0 million, which will be used to fund the recently announced Factiva acquisition and to pay down debt.
"This sale and the pending acquisition of Factiva are the latest examples of our commitment to transform Dow Jones from a company heavily dependent on print publishing revenue to a more diversified company capable of meeting the needs of its customers across all consumer and enterprise media channels, whether print, online, mobile or otherwise," said Rich Zannino, chief executive officer of Dow Jones. "By selling these papers for more than 11 times EBITDA and buying the remaining 50% of Factiva for an effective price after tax benefits and cost synergies of about 4 times EBITDA, we are efficiently redeploying capital from print to faster growing digital publishing." Mr. Zannino concluded, "Our remaining local media properties generate strong financial returns and operate in attractive markets and they will support the Dow Jones transformation as they extend their strong local franchises from newspapers to other forms of community media, especially the Internet, where advertising revenues have been up nearly 50% this year at these properties."
The six papers to be sold are: the News-Times of Danbury, Conn.; The Daily Star of Oneonta, N.Y.; the Press-Republican of Plattsburgh, N.Y.; the Santa Cruz Sentinel (Santa Cruz, Calif.); The Daily Item of Sunbury, Pa.; and the Traverse City Record-Eagle (Traverse City, Mich.). After the transaction, Dow Jones' Local Media Group will continue to publish eight daily and 15 weekly newspapers and their community Internet sites in seven U.S. states with combined daily print circulation of 282,000, Sunday print circulation of 316,000 and online average daily unique visitors of 119,000.
Dow Jones will receive $276.1 million of the $282.5 million purchase price upon closing, which is expected to occur in the fourth quarter of 2006 and is subject to regulatory approvals and other customary closing conditions. The balance of the purchase price will be paid upon transfer of real property, subject to satisfaction of environmental conditions, in later periods.
For the full year 2006, we estimate that the six papers will have combined revenue of $96.3 million, operating income of $22.3 million and EBITDA of $25.0 million. We will offset federal capital gains taxes entirely with available capital loss carryforwards. We expect to update our recently reported third quarter earnings as we will record a special gain of $1.07 per share in the third quarter as we recognize the value of the capital loss carryforwards to be utilized in the sale. We expect to record a special gain on the sale of the properties of about $1.50 per share when the deal closes in the fourth quarter. We expect the sale to be about 1 cent per share dilutive in the fourth quarter 2006 and 3 cents per share dilutive in 2007. In 2006, the Local Media Group will comprise about 19% of Dow Jones revenue and in 2007, it will comprise about 14%.
J.P. Morgan Securities Inc. and Dirks, Van Essen & Murray served as financial advisors to Dow Jones & Company. Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisor.
About Dow Jones & Company
Dow Jones & Company (NYSE:DJ); (dowjones.com) publishes The Wall Street Journal and its international and online editions, Barron's and the Far Eastern Economic Review, Dow Jones Newswires, Dow Jones Indexes, MarketWatch and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Group of Factiva and with Hearst of SmartMoney. Dow Jones also provides news content to CNBC and radio stations in the U.S.
The Dow Jones & Company logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2636
Information Relating To Non-GAAP Reconciliation and Forward-Looking Statements
This press release contains forward-looking statements, such as those including the words "believe," "expect," "intend," "estimate," "will," "plan" and similar expressions, that involve risks and uncertainties that could cause actual results to differ materially from those anticipated, including: the risk that the conditions to the sale are not met and the sale is not consummated; the risk that if the sale is not consummated or is delayed the Company may need to pursue alternative means of financing the Factiva acquisition and that the Company will not be able reduce debt and to utilize its capital loss carryforwards from the proceeds of the sale; and such other risk factors as may be included from time to time in the Company's reports filed with the Securities and Exchange Commission and posted in the Investor Relations section of the Company's web site (www.dowjones.com). The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. This press release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, we have attached to this press release a reconciliation of those measures to the most directly comparable GAAP measures.
EBITDA
EBITDA is widely used in the media industry as a measure in evaluating the market value of media properties. EBITDA is not a measure of performance under generally accepted accounting principles and should not be construed as a substitute for net income as a measure of performance, nor as a substitute of cash flow as a measure of liquidity.
Reconciliation of Six Local Newspapers Estimated 2006 Operating Income to EBITDA as Used for Disposition Multiple:
Estimated
(in millions) 2006
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Operating Income $ 22.3
Adjusted for:
Depreciation and amortization 2.7
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EBITDA $ 25.0
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Disposition price $ 282.5
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EBITDA multiple received
(disposition price/EBITDA) 11.3
Dow Jones & Co.
Reconciliation of Factiva Estimated 2006 Operating Income to Pro-forma EBITDA as Used for Acquisition Multiple:
Estimated
(in millions) 2006
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Operating Income $ 12.0
Adjusted for:
Depreciation and amortization 10.0
Restructuring (principally employee severance) 3.0
One-time employee benefit costs 2.0
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Recurring EBITDA $ 27.0
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Pro-forma(a)
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Incremental EBITDA acquired
(1/2 of recurring EBITDA) $ 13.5
Content and trademark fees to former Parent 8.0
Cost synergies 19.0
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Pro-forma EBITDA $ 40.5
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Upfront acquisition payment $ 160.0
Future payments 25.0
Less: tax benefit from step-up in tax basis (25.0)
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Adjusted economic value paid $ 160.0
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EBITDA multiple paid (adjusted
economic value paid/pro-forma EBITDA) 3.9
(a)Pro forma includes annualized purchase synergies and takes into account the elimination of certain payments which will no longer be paid by Factiva to Reuters