Macquarie Media Group, an Australian Investment Group, recently acquired American Consolidated Media (ACM) a publisher of 40 local newspapers which serve significant portions of nine regional communities in Texas and Oklahoma. ACM's CEO Jeremy Halbreich talked to Portada about his company's expansion plans and his thoughts about the Hispanic print media market.
Question: Macquarie Media will provide additional capital to your operation. How do you plan to expand?
A: We plan to expand into third and fourth tier markets in the U.S. where we can publish highly profitable community newspapers that are relatively isolated from competition and, therefore, provide stable cash flows. We want to expand our footprint.
Q: Do you see yourself expanding into Hispanic community newspapers?
A: We are definitely interested in analyzing Hispanic community newspapers as part of our expansion strategy. It's an exciting market. We already have properties that are very involved in the Hispanic market.
Q: What presence do you currently have in the Hispanic market?
A: In the Rio Grande Valley, we have two relatively large publications (that are Total Market Coverage products). Even though they are written in English, they have a large Hispanic audience. They are The Valley Town Crier (Mc. Allen, Circ. 123,795, free, weekly) and The Bargain Book, a shopper with zoned editions in Brownsville, Los Fresnos, San Benito and Harlingen (combined circ. 132,526). Both publications have an important insert business, most of it comes from local advertisers. One interesting aspect is that we give our advertisers the option to advertise in Spanish or English.
High sales multiple
ACM has annual sales of $30 million and was acquired for $80 million. The high sales multiple (2.67 times) the company was acquired for by Macquarie Media Group is a reflection of the high profitability (EBITDA ratios of close to 30%) of most ACM media properties, which operate in growth regions across Texas or more isolated regions with limited advertising alternatives. More than 80% of ACM revenues come from local advertising (less than 5% of advertising revenues come from national advertising), while paid circulation amounts to approximately 15% of revenues.
The vast majority of these properties are based in third and fourth tier markets and face little competition. Print media properties, although small, in third tier markets tend to be very profitable. Hispanic population in many of these smaller markets is increasingly at a very high rate.