Leonard Green to Buy 160 Newspapers

Los Angeles buyout firm Leonard Green & Partners entered the newspaper business Monday with a $310-million agreement to buy a group of community papers from Hollinger International, owner of the Chicago Sun-Times.

Under the agreement, Leonard Green will purchase more than 160 publications, including newspapers in the California cities of Mt. Shasta, Taft and Yreka.

The deal includes dailies, weeklies and free papers with a combined weekly circulation of about 900,000 in 11 states, the largest being Illinois, Missouri and New York.

“These papers are as rock-solid as you can get--[some are] more than 100 years old,” said Peter Nolan, partner with Leonard Green. “They have an extraordinarily consistent cash flow.”

Leonard Green plans more acquisitions in the fragmented world of community newspapers, where many of the publications are still family-owned, Nolan said.

With names such as Voice of the Mountain and Mt. Shasta Herald, the papers are attractive because they are less threatened by Internet competition than larger papers and typically have few local competitors, said Nolan, adding, “These [papers] are extremely well-run; no changes are planned. If anything, we’ll be hiring.”

Credit Suisse First Boston analyst Steven Barlow called the purchase price, estimated at about nine times cash flow, fair and said it “reaffirms that newspapers--especially community papers--still have great value. There’s room for consolidation in this industry.”

Newly created Liberty Group Publishing Inc. will run and own the newspaper group. Kenneth L. Serota, a vice president of law and finance at Hollinger, will join Chicago-based Liberty as president and chief executive.

The papers included in the deal, expected to close by February, represent about 40% of Chicago-based Hollinger’s U.S. newspaper holdings. The money will be used in part to retire debt at the publishing company, which owns papers in Britain, Canada and the U.S.

Hollinger’s stock slipped 6 cents in New York Stock Exchange trading Monday, closing at $13 a share.