And even more might be necessary to prompt an actual sale.
From a journalism standpoint, Ken Amundson is a pro's pro. He spent 25 years working at newspapers owned by Lehman Communications and was editor of the Loveland Reporter-Herald when it and newspapers in Lafayette, Louisville and Erie were sold to Prairie Mountain Media, currently part of the Alden Global Capital empire by dint of its affiliation with operating companies MediaNews Group and Digital First Media. Shortly thereafter, he left the Reporter-Herald and took a job as senior associate for Grimes, McGovern & Associates, a mergers and acquisitions firm, where he specializes in the newspaper industry.
According to Amundson, Grimes, McGovern "approached Alden three or four months ago, because we had a potential buyer of a product in another market that they owned. And Alden was amenable to hearing offers."
However, he says, the fund essentially set an opening bid of "four times EBITDA" — an acronym that stands for Earnings Before Interest, Taxes, Depreciation and Amortization. He defines this metric as "essentially the profit line or the cash flow line of the financials."
Before long, Amundson says, the buyer "did some due diligence on the property and decided to place an offer — and Alden made a counter-offer. What I saw was that they wanted six times EBITDA."
Applying this measure to the Denver Post is challenging, since the intricacies of its financial situation haven't been made public. But sources have confirmed to Westword that the Post generated $28 million in profits during fiscal year 2017, with an additional $8 million coming from the other Digital First Media papers in Colorado, the Reporter-Herald among them.
Amundson says that in lieu of multiplying the Post's actual EBITDA, substituting the profit figures should at least provide a general idea of a dollar amount that might pique Alden's curiosity. With that in mind, it would probably take $168 million (six times $28 million) to get the hedge fund to take a potential buyer seriously regarding the Post individually, and $216 million (six times $28 million plus $8 million) for all the Colorado properties.
The $168 million starting bid for the Post is considerably higher than earlier speculation of $100 to $125 million. That would definitely up the level of difficulty for John Weiss, publisher of the Colorado Springs Independent, who's currently seeking investors for a possible attempt to purchase the Post and could even scare off billionaire bargain hunters. Note that Phil Anschutz is said to have made an offer for the paper within the last year, and we're told Alden didn't even bother to respond.
At a recent Denver Press Club meeting of folks concerned about the Post's future, Amundson shared this tale because "a buyer needs to be ready not only to make an offer that's going to be fairly substantial, but will also need to consider what reinvestment will be needed to rebuild newsrooms" — the editorial staff at the Post is now around 65 employees or so, down from a high of more than 300 — "and everything else necessary to make it long-term viable."
The bottom line for Amundson: "What Alden is going to require in terms of offers may be higher than anyone is anticipating."