Will Facebook's "Paper" Replace the Morning Newspaper? – January 2014 M&A Activity
Printers and publishers can’t seem to get a break, or at least not the respect that is deserved by industries that have for centuries been the core transmitters of knowledge and political freedom. (I know – that’s a bit heavy, but it’s true). Facebook has announced that its latest smartphone app which is designed to personalize and replace our newspapers is named “Paper.” The app offers news feeds curated by real live human editors, divided into “sections” such as sports and food, just like a real printed newspaper. Facebook obviously chose to name its new app “Paper” to impart the credibility we accord our printed news media. Should printers and publishers be flattered by the name or upset that the next generation will reach for their smartphone to read the morning “paper”?
Paper - that basic and most fundamental substrate of our industry - was at the core of a wide variety of deals announced in January, and those deals are likely to impact future supply and pricing. Assuming that the decline in demand for printed products levels off or slows down at some point, as a result of the transactions announced, printers are likely to have less available supply and a more limited choice of suppliers to pick from when they are sourcing paper in the future.
Right now, the demand for paper continues to decline. In response, two of the largest remaining US companies that manufacture printing papers reached out to each other and plan to merge. Drowning in debt, they apparently hope to hold each other above the surface. In a deal reported as “complex” and “essentially all debt,” Verso Paper announced that it was acquiring NewPage Holdings, forming the largest manufacturer of coated printing papers remaining in the US. However the buyers, Verso, are not really buying NewPage, rather they have put together a deal structure in which Verso will provide management and other services to NewPage, but NewPage will be kept at arms’ length as a separate company. In other words, “if we make it to shore, then great, we’re partners,” but “if you drown brother, well then thanks for the fees and services, and see you at your funeral.” Could this turn out to be an example of tying two rocks together, in hopes that they will float?