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A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: batbeer2 (IP Logged)
Date: January 31, 2013 10:58AM

While doing some research for my next article, I stumbled across a great company that isn't publicly traded (not directly). It does have its numbers on file with the SEC though.

Classified Ventures LLV (CV) is owned by A.H. Belo Corp. (AHC), Gannett Co. Inc. (GCI), Tribune Company (TRBAA), The McClatchy Company (MNI) and The Washington Post Company (WPO).

CV owns and operates Cars.com, Apartments.com and HomeGain.com. CV is also affiliated with HomeFinder.com.

Unlike their subsidiary, the newspapers that own the company are publicly traded. Their interest in the earnings of CV is hidden from view by GAAP accounting. In some cases, the market cap of the parent may be less than the fair value of the minority interest.



Classified Ventures LLC:
  • Is growing at a double-digit compound rate.
  • Currently generates revenue of roughly $400 million.
  • Has no debt and a mountain of excess cash.
  • Returns about half of its earnings to its owners through dividends.
  • Sports a ROE in excess of 50% (without debt!).
  • Has an after-tax net margin of 15% to 20%.



Based on the current market value of AWAY, MOVE and the price CoStar paid to acquire LoopNet.com, I believe Classified Ventures has a fair market value in excess of $1 billion.

McClatchy, Tribune and Gannett each own about 25% of CV. The Washington Post company owns about 15%.

That’s a remarkable hidden asset for some of these companies.

Read more:
2011 SEC filing of CV
About CV
Article about CV
Forbes: Tribune’s minority stake in the Food Network, CareerBuilder and CV worth $2.26 billion.


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: AlbertaSunwapta (IP Logged)
Date: February 1, 2013 08:03AM

So do you own anything mentioned here?


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: batbeer2 (IP Logged)
Date: February 1, 2013 09:50AM

WPO.

I'm taking a serious look at AHC. Hope to write about that one sometime this weekend.


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Re: A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: AlbertaSunwapta (IP Logged)
Date: February 2, 2013 08:22AM

Depending on CV's liquidity, the asset value also makes MNI's situation seem far less dire. ;-)


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Re: A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: AlbertaSunwapta (IP Logged)
Date: February 2, 2013 08:29AM

On the issue of free online news vs newspapers, the issue is much like the argument that says; why I don't buy books, because I can get them for free at the library. The reality is that people taking that stance, don't read books. Today people say why subscribe to newspapers when their news is free online. Well, the reality is that people no longer sit down for an hour to read news stories.


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: batbeer2 (IP Logged)
Date: February 2, 2013 01:55PM

>> Depending on CV's liquidity, the asset value also makes MNI's situation seem far less dire. ;-)

Yes.

Also, MNI seems to have some other, similar, assets.

You want to advertise used cars and:

- you either go through the newspapers and they take a cut
- or you go online and they take a cut.

The last one is less obvious from the numbers (for now).

It seems to me the newspapers saw this coming. They didn't want to kill each other in a winner-take-all online bloodbath so they formed these consortiums 12-15 years ago. Now they've got the classified advertising market cornered... again. This time round it's a national monopoly.

CV spits out a mountain of cash. They've started returning that cash to the owners. That's a lot of cold cash coming in for the likes of MNI. If the dividend stream keeps growing at this rate, MNI could make it out of the woods in fine shape. They may not need to sell out. Running a website for 25m visitors costs a lot less than printing and distributing a newspaper for the same number of readers.

Less than a handful of businesses I've looked at are this profitable. PMD, UG and MCO come to mind.


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: AlbertaSunwapta (IP Logged)
Date: February 2, 2013 08:33PM

On consortiums, I'd bought JCI Technologies back in the mid 1990s. It should have had the whole market.

[en.wikipedia.org]


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: batbeer2 (IP Logged)
Date: February 3, 2013 02:35AM

The JCI story is strange and tragic..... You've been looking at the space a decade or two longer than I have.

Still trying to find time to write about AHC. You back out 40m of excess cash and 70m of RE held for sale and you get CV and the newspaper for free.


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: sharonh@linkedin (IP Logged)
Date: February 4, 2013 08:47AM

Not sure why CV is considered "hidden" - been out there for quite some time. Tribune is in the process of selling its stake, however. Gannett, McClatchy and Tribune are also part owners of CareerBuilder.


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Re A Remarkable Hidden Asset of Some Newspapers - Classified Ventures LLC
Posted by: batbeer2 (IP Logged)
Date: February 4, 2013 10:36AM

Hi Sharonh

Thanks for your comment.

As an operation, CV itself is there for all to see. As an asset, I believe it's profitability is obscured by GAAP. The earnings of CV are not consolidated into the earnings of the parent companies.

One definition of a hidden asset (investopedia):
Assets that may be undervalued on a company's balance sheet and therefore not incorporated into or reflected in the company's share price.

I believe the balance sheets of the newspapers do not reflect the fair value of the subsidiary. Some investors may be unaware of this component of intrinsic value.


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