GVC.TO - Glacier Media

[petec]

So I somehow managed to average out of this at a slight profit, which is a victory considering the share price now! 

 

Just wondering how people feel (especially Parsad) given the retention of cash flows and the new share price?

[doc75]

Apparently management feels better about it than they have in years.  Insiders have been buying in droves recently, something I don't ever recall seeing for this company.

 

 

[matjone]

Unfortunately the business performance has declined along with the price.

 

I did a google search and large newspapers were selling for 3-5x ebitda last year, 5.8x average for smaller ones.  According to glacier business information businesses go for 7x-15x.

 

They made 13 m ebitda for the last 6 months for business information, 8m for community media.  Using the low ranges that would value the whole thing at 246m.  That doesn't take subtract anything for account corporate overhead of 4.5m.  Then you have 72 m net debt and the tax thing to take into account.  I think the tax assessment should be discounted somewhat because they may get it reduced or eliminated and it is not due immediately.

 

I like the fact that they are cutting the dividend, selling properties and paying down debt.

[doc75]

Seems they now recognize that demand for community-focused print media isn't as resilient as originally thought, so they're focussing more on the information segment.  I generally don't like management changing their tune, but in this case I like knowing that they won't blindly double down on community papers.

 

I bought a small position yesterday.  I think retaining that dividend and paying down some debt will do wonders for them over the next couple years.

 

 

 

 

[sculpin]

Highest volume day in Glacier Media since 2012 - 3.3 million shares change hands mostly at $0.60 - a fraction on the high of $5 in 2007 and the lowest the shares have been since early 2000 (it appears that GVC went public in 1999 around $0.75). There is a 3.4 million share short position that may (I'm speculating) have had a portion covered yesterday in that high volume.

 

Any value guys getting back into this at these levels? There has been some substantial insider buying in August & September between $0.80 and $1.00 but this halted abruptly on September 25th when insiders appear to have become blacked out. The stock finished Friday with the iceberg large offering still sitting there at $0.60 - obviously we may have more volume going through next week.

 

Here is the aggressive insider buying from August & September. Sorry for the formatting....

 

Sep 25/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.793 3,000 0.0% 7,709,512

Sep 24/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 - 0.800 13,000 0.2% 7,706,512

Sep 23/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 10,500 0.1% 7,693,512

Sep 22/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 20,000 0.3% 7,683,012

Sep 21/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 8,000 0.1% 7,663,012

Sep 18/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.783 - 0.793 7,000 0.1% 7,655,012

Sep 17/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 3,000 0.0% 7,648,012

Sep 16/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 - 0.800 5,500 0.1% 7,645,012

Sep 15/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.800 458,000 6.4% 7,639,512

Sep 14/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.800 6,000 0.1% 7,181,512

Sep 11/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.770 - 0.800 34,500 0.5% 7,175,512

Sep 8/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.920 - 0.930 13,000 0.2% 7,141,012

Aug 27/15 Kennedy, Jonathon James Lesl... Indirect Ownership Public market buy Common Shares 0.790 20,000 12.9% 175,000

Aug 26/15 Kennedy, Jonathon James Lesl... Indirect Ownership Public market buy Common Shares 0.780 - 0.790 25,000 19.2% 155,000

Aug 26/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.790 40,000 0.6% 7,128,012

Aug 25/15 Kennedy, Jonathon James Lesl... Indirect Ownership Public market buy Common Shares 0.790 30,000 30.0% 130,000

Aug 24/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.770 10,000 0.1% 7,088,012

Aug 21/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.860 50,000 0.7% 7,078,012

Aug 21/15 Smysnuik, Orest Indirect Ownership Public market buy Common Shares 0.910 2,000 2.0% 101,183

Aug 20/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.910 1,000 0.0% 7,028,012

Aug 20/15 Smysnuik, Orest Indirect Ownership Public market buy Common Shares 0.910 9,000 10.0% 99,183

Aug 19/15 Kennedy, Jonathon James Lesl... Indirect Ownership Public market buy Common Shares 0.930 85,000 > 100% 100,000

Aug 19/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.930 250,000 3.7% 7,027,012

Aug 19/15 Smysnuik, Orest Indirect Ownership Public market buy Common Shares 0.950 9,000 11.1% 90,183

Aug 18/15 Madison Venture Corporation Direct Ownership Public market buy Common Shares 0.950 - 0.970 3,000 0.0% 6,777,012

Aug 18/15 Smysnuik, Orest Indirect Ownership Public market buy Common Shares 0.970 - 1.000 12,000 17.3% 81,183

Aug 17/15 Kennedy, Jonathon James Lesl... Indirect Ownership Public market buy Common Shares 0.780 - 0.860 15,000 > 100% 15,000

Aug 17/15 McElvaine, Timothy Andrew Indirect Ownership Public market buy Common Shares 0.800 2,000,000 71.4% 4,800,000

[sculpin]

Wow crickets here on what was once a hotly discussed topic. Any way, I see that Journal Media was acquired by Gannet a few weeks ago....

 

Gannett to Acquire Journal Media Group for $12.00 per share

Adds approximately $450 million to Gannett’s revenues

http://www.businesswire.com/news/home/20151007006588/en/

 

I have these notes on the business from M Partners in Canada talking of the industry and speculating that New Media was a likely buyer prior to the purchase by Gannett. So it appears consolidation continues in the US...

 

New Media as the likely acquirer of JMG as the co was set up as a sector roll up vehicle, targeting $1B in acquisitions by 2016, having completed $585M in the past two years. JMG is perfectly in its wheelhouse. The sector is consolidating, and Warren Buffett has been a buyer (over $350MM in last 3 years).  As well, the sector is half the size it was 4 to 5 years ago due to this consolidation.

 

Despite the stigma associated with small town newspapers, owing to secular decline in print, we believe the stock is mispriced and has significant margin of safety embedded in its real estate and takeout optionality.

 

Journal Media Group (NYSE: JMG), headquartered in Milwaukee, is a media company with print and digital publishing operations serving 14 U.S. markets in nine states, including the Milwaukee Journal Sentinel, the Naples Daily News, The Commercial Appeal in Memphis, and Ventura County Star in California. Formed in 2015 through a merger of the newspaper operations of The E.W. Scripps Company and Journal Communications, Inc., the company serves local communities with daily newspapers, affiliated community publications, and a growing portfolio of digital products that inform, engage and empower readers and advertisers.

 

[doc75]

Sculpin - please post some more tomorrow!  Your revival of this thread was surely responsible for today's bump.

 

I started nibbling after they cut the dividend and it went below $0.80.  I couldn't help myself and bought more just over $0.60.  I think this is an opportunity to take advantage of a few large holders exiting an illiquid stock, and a lot of negativity about the economy and print media etc.  But I really despise reading their financials -- it always feels like a sales job, lots of words and little content.  So this has to stay a small position for me.  FWIW, Madison's insider purchases were a catalyst for me  to re-enter, much as the lack of insider purchases at $1.50 were one reason for my exit.

[sculpin]

This from Lester Asset Management Q3 report...

 

Among losers, we highlight two long time holdings which operate profitable print media businesses. These two stocks have been severely hit after eliminating their dividends so that they can focus on debt reduction and growth opportunities. While in secular decline, both Glacier Media and FP Newspapers generate strong free cash flow with minimal capital expenditures. They now trade at very low valuations of 3.5X and 2.5 X EBITDA (earnings before interest, taxes, depreciation, and amortization) respectively. Glacier owns community newspapers in Western Canada and several high margin business information services, and our sum-of-the-parts analysis indicates that the shares are worth significantly more than what they currently trade at. Glacier plans to divest of its community media assets and reinvest in its high growth data businesses, and insiders have been aggressively buying shares. FP, on the other hand, is looking to further consolidate print operations in Manitoba and Saskatchewan. Despite now having a market cap of less than $10 million, FP has paid out substantial dividends to shareholders over the years totaling $178 million since going public in 2002. We expect cost cutting and accretive acquisitions to boost its share price.

[Cardboard]

Glacier is in the late stages of two planned acquisitions this Fall. No word yet on how much this is worth but, it will cost money even if they are accretive as they claim. There is also $25.4 million possibly needed to pay the remaining portion of the claim from the CRA. So I see uncertainty to their goal of reducing senior debt to $50 million.

 

I have promised myself that I would no longer buy businesses in a secular decline. Every quarter more bad news comes out. You keep on hoping but, it never moves in the right direction.

 

The insiders were also there before at much higher prices, so for them to be buying shares now gives me little comfort: they could be wrong again.

 

Cardboard

[uncommonprofits]

Glacier is in the late stages of two planned acquisitions this Fall. No word yet on how much this is worth but, it will cost money even if they are accretive as they claim. There is also $25.4 million possibly needed to pay the remaining portion of the claim from the CRA. So I see uncertainty to their goal of reducing senior debt to $50 million.

 

I have promised myself that I would no longer buy businesses in a secular decline. Every quarter more bad news comes out. You keep on hoping but, it never moves in the right direction.

 

The insiders were also there before at much higher prices, so for them to be buying shares now gives me little comfort: they could be wrong again.

 

Cardboard

 

A few scenarios with regards to the CRA claim:

- They negotiate a settlement.  The 50% deposit might be sufficient - it might not.  If CRA stood firm in such a settlement and required substantially more than is presently deposited one would think they would litigate to the fullest extent.   

- Litigate & Lose  >> full payment would not be due for several years down the road as this would be a drawn out process. 

- Litigate & Win >>  Gain back their deposit but not until several years down the road.

 

Assign a 33.3% chance to each of the above scenarios:

- 66.6% chance little if any more contribution will need to be made to CRA.

- 33.3% chance they need to double up on their present deposited amount (but will be several years from now)

- 33.3% chance they could actually have their deposit returned (but several years from now)

 

The above odds are of course an arbitrary 1/3 chance of each - which I think could be conservative.  The cost of litigation and it's related distraction have not been figured in.  In all likelihood - the above underestimates the chance of a negotiated settlement. 

 

Regarding secular decline - this becomes more of a non issue as they divest and monetize community newspapers.  Such divestiture(s) also raises capital to fund acquisitions and keep the debt level in check.  Outside newspapers - I also don't think they are finished yet with certain business info, etc divestitures (seems to be a select few operations remaining that do not meet the stated transformational growth focus strategy) - helping them further to attain the goal of $50 million net debt while still being able to make more focused acquisitions.

 

I sold off my GVC position early in the spring - moving most of it to GCT.C.  But I was buying back significantly into GVC at 60-64 cents (less than half the price I was selling it for back in the spring).  If they were to ever divest the community newspapers completely - this could have the effect of paying off debt entirely, meaning one was buying the growing business information segment for slightly more than 2x EBITDA (today's pricing perhaps brings that multiple up to almost 3x).  It's probably worth 8-12x, maybe more.   

[Cardboard]

Thanks for the comprehensive response and disclosure. Very much appreciated.

 

I was reading their latest quarterly report this morning, maybe too quickly. Where did you guys read that they are looking to sell their community papers?

 

Cardboard

[uncommonprofits]

Thanks for the comprehensive response and disclosure. Very much appreciated.

 

I was reading their latest quarterly report this morning, maybe too quickly. Where did you guys read that they are looking to sell their community papers?

 

Cardboard

 

I am mainly reading between the lines in the company's recent commentary:

 

Efforts will be made to restructure community media assets to create greater direct value and simplicity for Glacier, or monetize where appropriate value can be realized.

Even the un-bolded part seems they are being restructured for an eventual sale.

 

Glacier's core focus is to operate as an information and marketing solutions company pursuing growth in sectors where the provision of essential information and related services provides high customer utility and value.

If this is to be the 'core focus' - I think the ultimate goal will be to make the distractions go away.

 

Management is seeking to reduce senior debt levels to less than $50-million, such that continuing debt can be supported by the business information operations, and the community media operations can provide free cash flow for investment purposes, further debt reduction and financial flexibility.

Again emphasis is placed on the business information operation.  Selling of the community papers may not happen overnight but I think monetizing them is the preferred choice provided they can get the appropriate value. They wish to increase the size of the business info segment as compared to community newspapers.  Selling the newspapers in one fell swoop would do this rather dramatically.  Monetizing a little at a time would obviously be more gradual.  How quickly the newspapers are sold off remains to be seen - but I think it will happen.

 

The quote from Lester Asset Management that sculpin posted above is interesting confirmation.  They may know more direct info than my simply reading between the lines - but I am not sure. 

[Cardboard]

Thanks. And the business information multiple of 8-12x EBITDA is based on a Thomson-Reuters multiple? By the way Glacier is quoting a 7-15x + in their latest report.

 

Cardboard

[uncommonprofits]

TRI actually trades at about 15x EBITDA.  But we are in a somewhat over-valued market that over time will come down as interests ease upward.  10x is a more cautious multiple - but for more leeway I am figuring 8-12.  This is more or less in line with GVC's guidance (albeit at the lower end).  We do not have much in the way of figures - but the two related divestitures GVC did back in Dec & Jan totaled $24 million of proceeds.  I seem to recall them commenting they were sold for very good multiples -- pure speculation, but my guess is around 12-15x.  Wish I could track down something more accurate though. 

[uncommonprofits]

I found where there is indication of the multiples paid for the two GVC divestitures I mentioned totalling $24 million. 

 

For the first one refer to the 2014 annual report where $1.4 million is reported as discontinued  EBITDA.  This would seem to relate entirely to the trade media assets sold for $19.65 million and associated real estate of $8.35 million for a total of $28 million.  If one were to assign zero EBITDA toward the real estate operations and rather all of it to the trade media assets it works out to a multiple of 14.0x EBITDA ($19.65/$1.4).  If part of the EBITDA applies to the real estate value then the multiple would actually increase.  For all intents and purposes though, assume they sold these trade media operations for at least 14x EBITDA.

 

The second one involves the sale of Iron Solutions for $4.3 million.  This is the one where I recalled the commentary I referred to (keep in mind that Iron Solutions fit their renewed focus as it is a seller of integrated software services for agricultural equipment dealerships): 

While Glacier intends to continue its growth in the agricultural sector and expand its position as a leading provider of agricultural information, it was deemed prudent to sell the interest in Iron Solutions at an attractive valuation, and focus efforts and capital on organic growth and acquisitions over which it has greater operational control. The transaction reaffirms the value creation potential of Glacier's overall focus on the business information and rich data space.

 

While the above two divestitures might be opportunistic by nature and perhaps exceeds the average multiple of their core base - it gives a bit of an idea as to the high end multiple that GVC indicates.

 

 

[sculpin]

Excluding Warren Buffett, there are few investment managers out there that would recommend buying a newspaper company in this day and age.

 

Why Value Fund Smead Capital Management Likes Gannett Co Inc

"I’d be remiss if I didn’t also point out that while the 28-year-old male or female that is currently spending most of his or her money on craft beer, Chipotle and Apple consumer electronics doesn’t care much about local news, as they marry, buy homes and have children that’s going to change. As the millennial demographic ages, that should be an important secular tailwind for a company like Gannett."

 

However, William Smead, Tony Scherrer and Cole Smead of Smead Capital Management are willing to take on the challenge. In particular, the three partners are betting on Gannett Co Inc, a pure-play daily community news organization, which owns USA Today and more than 90 local newspapers, mostly in small and mid-sized markets.

 

William, Tony and Cole discuss why they like Gannett Co Inc in the October 30 issue of Value Investor Insight. They believe that after a long and painful restructuring, Gannett is now in a position to capitalize on its leading position in local markets, providing local news to local people, news that isn't covered by any of the national media. This should make Gannett's publications hugely valuable to local advertisers.

 

Gannett is planning to spend $200 -- $250 million per annum rolling up the US newspaper industry, which should help improve group efficiency and bolster the company's reputation with advertisers.

 

And this is a great time to be embarking on an acquisition spree. After years of declining revenues, the print news industry is trading at rock-bottom prices and Gannett, as the industry's largest player, should be able to extract some impressive cost savings from these low-cost acquisitions.

 

Gannett Co Inc Low valuation

 

At $15.70 ($16.70 at time of writing) Gannett's shares are trading at only seven times 2015's estimate of free cash flow and five times 2016's free cash flow estimate. The stock currently yields more than 4% and trades at an estimated forward P/E of 9.2.

 

Based on William, Tony and Cole's analysis, assuming only modest organic growth, and assuming that the acquisition plan is successful, earnings could double during the next six or seven years. Even without multiple expansion that would provide an excellent return, although, with earnings expanding at a double-digit rate, it's difficult to believe that Gannett's multiple will stay where it is today.

 

http://www.valuewalk.com/2015/11/gannett-co-inc-smead/

 

[uncommonprofits]

It seems most of that big volume was being bought long.  Very little of the short position was covered - just slightly more than 100k.  There remains a 3.3 million short position outstanding. 

 

Short Positions for GVC

Symbol Report Date Volume Change Shares Issued % Float

T : GVC 2015-10-31 3,323,600 -103,400 89,236,030 3.72

T : GVC 2015-10-15 3,427,000 -20,700 89,236,030 3.84

T : GVC 2015-09-30 3,447,700 -9,300 89,236,030 3.86

T : GVC 2015-09-15 3,457,000 -85,000 89,236,030 3.87

T : GVC 2015-08-31 3,542,000 -1,900 89,236,030 3.97

T : GVC 2015-08-15 3,543,900 1,400 89,236,030 3.97

T : GVC 2015-07-31 3,542,500 348,200 89,236,030 3.97

T : GVC 2015-07-15 3,194,300 360,100 89,236,030 3.58

T : GVC 2015-06-30 2,834,200 106,200 89,236,030 3.18

T : GVC 2015-06-15 2,728,000 22,900 89,236,030 3.06

[stahleyp]

The company is having a rights offering.

 

http://www.marketwired.com/press-release/glacier-media-inc-announces-rights-offering-tsx-gvc-2124633.htm

 

Anyone know what's the deal with that. It says "Rights will be offered on the basis of one right for each common share held. Four (4) rights will entitle the holder to subscribe for one common share of Glacier upon payment of the subscription price of $0.65 per common share. No fractional common shares will be issued. The rights offering will be conducted in Canada only."

 

The stock is barely above that price now. Wouldn't 4 of these be virtually worthless? I'm assuming I'm missing something.

[morningstar]

The company is having a rights offering.

 

http://www.marketwired.com/press-release/glacier-media-inc-announces-rights-offering-tsx-gvc-2124633.htm

 

Anyone know what's the deal with that. It says "Rights will be offered on the basis of one right for each common share held. Four (4) rights will entitle the holder to subscribe for one common share of Glacier upon payment of the subscription price of $0.65 per common share. No fractional common shares will be issued. The rights offering will be conducted in Canada only."

 

The stock is barely above that price now. Wouldn't 4 of these be virtually worthless? I'm assuming I'm missing something.

 

Clearly, the rights don't offer a ton of value in themselves, but they allow holders to avoid dilution if they choose (as opposed to just announcing a private placement of equity to the largest shareholders).

[stahleyp]

that makes sense. thanks morningstar.

[sculpin]

Anyone exercise their rights? Attended the AGM? Many hard core value guys have been hurt badly by this Company. Surprised some still defend this management team. Would appreciate any views on the potential sum of the parts of GVC at this stage. Certain long term shareholders are now trying to sell their positions.

 

Would like them to merge the GVC/GVIC entities to simplify the corp structure. Why not?

Would like to see final settlement over the CRA issue.

Still poor at outlining the value in certain of their investments.

 

 

[Saj]

I attended the AGM last week. I was one of only two outside shareholders to attend. There were a few directors and a few managers there.

 

CEO made a presentation for the benefit of the two of us. I thought it was good, but nothing earth-shattering in it if you follow the company. Same old harvest the cash from newspapers, and grow the successful non-newspapers.

 

I gave my broker instructions to exercise this morning. (Yes, he's fat, but I'm referring to the rights.)

[Faustus]

Call me crazy, but the numbers and story are starting to look intriguing here—

 

1) It’s selling a touch under tangible book despite being profitable and generating positive free cash flow

 

2) they’ve paid down a significant portion of debt (thanks in no small part to last year’s rights offering). Off the top of my head, cash flow leverage is probably about 2.5x

 

3) operating margins are thinning as sales continue to fall; in some ways they can’t restructure fast enough to hold margins, but earnings from their joint ventures and investments are a material portion of income and growing, which is compensating for some lost operational profit. Also, while most expenses are declining with sales, they’ve hiked expenses for advertising — I read this as a positive sign.

 

4) rew.ca looks impressive, and just take a look at what Zillow is worth to see that this concept can fetch a healthy valuation. The company talks of growth in many of their newer products/publications, but not a lot of details to contextualize this. The Company has information to sell, the question is: have they identified ways to do so in this century.

 

Issues: not a lot of visibility into the balance sheets of the investments and joint ventures — how reliable are the earnings and cash flows from these sources?  The thinning operating margins are troublesome, if they are hoping to build out some of their up and coming products, the mature businesses need to stay profitable in the meantime to pay down debt and fund investment. Oil, mining, and agriculture industries don’t seem to be picking up too much — sales to these end markets have been depressed for years.

 

CFO recently purchased 40k shares.

 

Full disclosure — I’m down over 50%, but don’t feel inclined to sell. Unfortunately, it’s only now starting to look like an appetizing value play.  With that said, I’m having trouble pulling the trigger on more purchases; would appreciate other’s thoughts.

 

[doc75]

I haven't looked at this in a while.  Pardon my laziness:  What is the current state of the CRA dispute?  That was a substantial overhang on the stock for quite some time.

[Faustus]

I haven't looked at this in a while.  Pardon my laziness:  What is the current state of the CRA dispute?  That was a substantial overhang on the stock for quite some time.

 

Still unresolved; fwiw management is confident in its position. 50% of the penalty has been deposited;a loss in the case would mean funding another $27mm. In that case you could throw out the attractive tangible book ratio, and they would almost certainly draw down on the revolver again.

 

Thanks to the balance sheet cleanup this wouldn’t be a lethal blow, but obviously a setback.

 

The flip side: if it works out, 27mm of cash is freed up on the balance sheet.