On September 10th, Lee Enterprises (LEE) announced that it had agreed to sell one of its community newspaper publishing companies. Lee entered into an agreement with San Diego real estate developer Doug “Papa Doug” Manchester to sell the Escondido, CA area North County Times to Papa Doug for $12M. Despite the fact that we were disappointed that Lee was only able to harvest $12M from the sale of the paper, we believe that it was a good idea for Lee to sell it while it still had value. Lee acquired ownership of the North County Times in 2002 when it acquired Howard Publications for $750M. Under Lee’s ownership, average daily circulation for the North County Times declined from 92,490 in 2002 to 75,727 in 2011. Lee also acquired Pulitzer Inc for $1.46B in cash in 2005. Based on the fact that the Howard and Pulitzer acquisitions saddled Lee with $2.2B in debt, we believe that Lee needs to find a way to sell more newspapers to the public or more newspapers publications to investors.

Papa Doug had purchased the San Diego Union-Tribune from the private equity group Platinum Equity in November 2011 for $110M and Platinum Equity had acquired it from The Copley Press in 2009 for an undisclosed amount. Papa Doug had renamed the San Diego Union-Tribune to U-T San Diego in January 2012 and we think that this acquisition of the North County Times is a natural fit for him considering that U-T San Diego serves the city of San Diego and its immediate suburbs and the North County Times serves exurban areas of San Diego County like Escondido, Oceanside and Temecula.

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