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Newspaper Dealmaking Heats Up as Newcastle Aims to Spend $1B

NEW YORK ( TheStreet) - Phil Murray, a partner at the pre-eminent newspaper advisory firm Dirks, Van Essen & Murray, based in Santa Fe, N.M., says mergers and acquisitions among print legacy businesses remain vibrant even if volume has declined in recent years.

Murray, a former journalist, was talking about the future of newspaper dealmaking after Wes Edens, Chairman of Newcastle Investment Corp. (NCT), a health care real estate investment trust and affiliate of the private-equity firm Fortress Investment Group, said last week that his company is prepared to spend as much as $1 billion aggregating small and medium-sized newspapers into New Media, the working name of the entity that will combine Fortress's Gatehouse Media (GHSE) with the publications that Newcastle acquired last week from News Corp.'s (GHSE) Dow Jones Local Media Group.

"There is sufficient deal flow for GateHouse/Newcastle to spend $1 billion if they want to," Murray said, in a phone interview from Santa Fe.

Gatehouse, which has $1.2 billion in debts, said it plans to file a "pre-packaged bankruptcy" this week with creditor support.

"That wouldn't have been a lot six years ago, but one billion dollars buys you a lot of newspapers now," Murray added. "A lot of newspaper dealmaking is driven by building larger, regional clusters that make it more attractive to sell larger advertisers on a digital footprint. The Dow Jones papers fit pretty well with what they've already got."

So far in 2013, newspaper mergers and acquisitions have totaled $635 million, just about even with all of 2012 when deal volume reached $643 million, according to data compiled by Dirks, Van Essen & Murray. Of course, Jeff Bezos' purchase of Washington Post's (WPO) namesake publication pads that number. In 2011, newspaper M&A hit $789 million, a gigantic rebound from 2010 when dealmaking totaled just $149 million.

Those were all down years compared to life before the 2008 recession, when newspaper deals totaled $2 billion to $3 billion per year, Murray added. M&A activity in the industry skyrocketed to a record $20 billion in 2007, that year of drunken-spending when Sam Zell overpaid to take Tribune (TRBAA) private and Rupert Murdoch succeeded in fulfilling his dream to own The Wall Street Journal when News Corp. (NWSA) paid top-dollar to take control of Dow Jones Co. In that same year, Gatehouse bought a handful of newspapers from Gannett (GCI ).

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