How Much are Knight Ridder’s Spanish-language Dailies Worth?

Knight Ridder, which is currently accepting bids from investors interested in purchasing the media company, owns two Spanish-language dailies: Miami's El Nuevo Herald and Dallas Fort Worth's Diario La Estrella. While these two properties are only a small part of Knight Ridder's US $3.1 billion in annual revenues, they are certainly of strategic interest to any potential buyer. These newspapers could be included in a package deal for the whole company or, as has been the case with similar transactions in the past, be sold separately.

How much are these newspapers worth? Diario La Estrella and El Nuevo Herald are two very different properties. Diario La Estrella has only been a daily since September 2003, while El Nuevo Herald, the most successful Spanish-language daily in terms of revenues and EBITDA (Earnings Before Interest Depreciation and Ammortizations), has been around since 1987, and has been a daily for the past 7 years.

Diario La Estrella (US $12 million)
To estimate the value of Diario La Estrella, Portada® multiplied its projected 2005 revenues after rate card discount (see table below) by 3. A sales multiple, instead of an EBITDA (profitability) multiple was chosen because Diario La Estrella is only becoming profitable this year. Most newspapers are sold at a multiple of 2. However, young properties, particularly in the growing Hispanic market deserve a premium valuation, which is reflected in the higher multiple.

El Nuevo Herald (US $201 million)
El Nuevo Herald is the leader in advertising revenues among Spanish-language newspapers with US $59.82 million in revenues during the first ten months of 2005, according to TNS Media Intelligence 2005. Portada® estimates that total revenues, before rate card discounts, for 2005 will be almost US $84 million, helped by ad-sales in the traditionally strong November and December months.

Assuming that El Nuevo Herald has a 25% EBITDA margin and applying a 16 X EBITDA multiple, a value of approximately US $200 million can be derived for the Miami Spanish-language newspaper. In the general market, newspapers are sold for 10-12 times EBITDA multiples. El Nuevo Herald's “premium valuation” is due to the fact that it is a leader in the Miami market and has shown strong sales growth. The high EBITDA multiple also takes into account the fact that El Nuevo Herald is a paid newspaper. (In the table below, subscription and single copy sales were not included in El Nuevo Herald's sales figures, which only reflect ad sales).

Table: What are Diario La Estrella and El Nuevo Herald worth?

Newspaper

Diario La Estrella

El Nuevo Herald

Jan–Oct 2005 Revenues*

4.748

59.823

Revenues for Jan-Oct 2004 *

3.722

53.323

Annual Growth Rate*

27.6%

22.1%

Est. Annual Revenues 2005**

6.648

83.75

Est. Annual Rev. after 40% rate discount **

3.988

50.251

EBITDA margin**

0%

25%

Valuation **
(in US $ millions)

12 (3X Sales)

201

(16X EBITDA)

Note: Revenue figures are in US $ million
Source: * TNS Media Intelligence 2005, ** Portada® estimates


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