El Diario / La Prensa deal reflects the increasing role of financial investors in Hispanic print

In early July, Santa Monica (CA)-based Entravision Communi-cations Corp sold el Diario/La Prensa, the oldest major Spanish language daily newspaper in the US, to CPK NYC, LLC, a private investment group led by Clarity Partners LP (Los Angeles), BMO Halyard Partners (New York), Acon Investments (Washington) and Toronto-based newspaper consultant Knight Paton Media, for an aggregate consideration of US $19.9 million.

 

Financing for publishing ventures by investors outside the publishing industry has been relatively frequent in recent years. New York-based Solera Capital is one of the main backers of Latina magazine. Miami-based Vision Asset Management and Citigroup Venture Capital are the main investors in Zoom Media Group, publisher of LOFT and Poder. Other potential projects, including a venture to build the first national newspaper for Hispanics, are also looking to private equity funds for financial backing. Meximerica Media, a new venture led by Edward Schumacher, also hopes to publish Spanish language dailies in the Western and Southwestern US with the help of financial investors.

Backed by billions...

“The growing power of the Hispanic community bodes well for el Diario/La Prensa,” said Stephen Rader, Clarity Partners managing general partner. Clarity Partners is a private equity firm with $800 million in committed capital investments in media and communications. Mr. Rader was instrumental in acquiring and building Univision, the country's largest Hispanic television network.

Bruce A. Eatroff, managing partner of BMO Halyard Partners, tells Portadatm that, although investments in the newspaper industry are nothing new for BMO, the purchase of a Spanish language newspaper is a first for the firm. Halyard Partners is the New York-based private equity investment arm of BMO Financial Group. Halyard invests in media and communications companies located in the United States, Canada and Western Europe through Halyard Capital Fund L.P., with $450 million in committed capital. “This is an outstanding opportunity in a market which is clearly underserved,” Eatroff said. BMO Halyard owns The Boston Herald, the second largest newspaper in New England, and the Community Newspaper Company, publisher of 4 suburban daily newspapers, as well as weekly community newspapers, shoppers and specialty publications in Eastern Massachusetts.

...from outside investors

According to Felix Sención, publisher of Fútbol Mundial, Hispanic print media needs the infusion of outside capital. “Print has lagged far behind as a viable medium in the Hispanic market,” said Sención. “It's a fragmented market, similar to cable 25 years ago.” Sención explains that some players are looking to buy up titles, then sell a consolidated bundle of properties at a premium. “Eventually, someone will be able to take the lead on the national front, probably a large newspaper chain, such as Tribune or Hearst”, he notes. Sención cautions financial investors against

overestimating the sophistication of Hispanic print media.

“Our main goal is to make el diario/La Prensa the number one Hispanic newspaper in New York City again,” John Paton, partner at Knight Paton Media, told Portadatm. Knight Paton Media is a Toronto-based newspaper investment consulting practice which advises private equity firms, like the investors in CPK NYC. Knight Paton is currently working to increase the penetration and revenues of el diario/La Prensa. Last year the paper made a profit, with revenues of slightly more than US $20 million and a daily circulation of 56,000. New York City rival Hoy, owned by Tribune Co., sold an average of 91,000 copies during the same period. Industry insiders maintain that el diario/La Prensa readers greatly outnumber Hoy readers.

Paton and his partner Douglas Knight have been working at el diario/La Prensa's>New York offices at Hudson Street for the last 8 weeks. “We are helping the management team to improve el diario/La Prensa,” he explains. “We will be focusing on this project 5 days a week for many weeks

to come.” Paton plans to keep a low profile at el diario/La Prensa, and will instead work through the publisher and heads of departments.

Paton and Knight admit that they don't speak Spanish, but “we do speak newspaper,” Knight recently told the Canadian daily Globe and Mail. Both newspaper entrepreneurs cashed out their investment in Sun Media in 1999, when Quebecor Inc. bought out management, employees and other investors. Sun Media, a Canadian newspaper chain, owns 180 newspapers, including the Toronto Sun.

National Advertising

How will Paton add value to his investment? On of his main goals is to increase national advertising revenues at el diario/La Prensa. “Currently, national advertising accounts for only 20% of the paper's advertising revenue.

We intend to increase both the percentage of national advertising revenues and overall ad revenues,” said Paton.

In order to reach their goal, el diario/La Prensa is building relationships with agencies and media buyers. He is not specific about an EBITDA (earnings before interest taxes, depreciation and amortization) margin goal. “Well run newspapers have EBITDA margins of between 15% and 30%, depending mostly on the degree of competition in their markets.”

Paton is undergoing a review process of the paper's editorial content with Nelson Borrero, el diario/La Prensa's editor. Borrero's plans to revamp the newspaper's content were put on hold by Entravision while they attempted to sell the newspaper.


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