Valpak too valuable for publisher Cox to keep

The direct mail industry is feeling the impact of the downturn in advertising, but compared to the newspaper business, it's doing great. That, in a nutshell, is the likely reason that Cox Enterprises Inc. put Valpak, its Pinellas County coupon distribution business, up for sale.

"Cox apparently was looking for assets to sell, and that's one they'd probably be able to get a pretty good price for," said newspaper industry analyst John Morton. His Maryland consulting firm has worked for Cox in the past, and he said he has visited Valpak's state-of-the-art printing facility in St. Petersburg.

"That increased efficiency considerably," he said. "It's a well-run outfit."

Cox, based in Atlanta and the owner of such newspapers as the Atlanta Journal-Constitution, is trying to raise money to pay down debt by selling Valpak and 11 newspapers in Texas, North Carolina and Colorado. It has separated the deals, hiring Goldman Sachs to find a buyer for Valpak and Citigroup to handle the newspapers. The company has not revealed an asking price.

Valpak's revenues are about $260-million a year, but as a private company, the details aren't disclosed. The company makes money by selling advertising directly in eight regions and by selling coupon printing and mailing services to its 200 franchisees who sell advertising in their communities. About 20-billion coupons will go out this year in 521-million blue Valpak envelopes.

"Everybody that draws money from advertising is faltering some, but it seems to have affected direct mail somewhat less than traditional media," Morton said. "It's a cheap way that advertisers can resort to."

Valassis Communications, a publicly held competitor to Valpak, reported that its direct mail revenues were relatively flat in the second quarter — increasing 0.4 percent — but profits rose 18 percent thanks to increased efficiency.

"All advertising businesses have been affected, but we're seeing a tremendous increase in consumer interest in coupons," said Deanna Willsey, Valpak's director of communications.

Bobby Adkins, who owns four Valpak franchises, said his business is up this year. "People are becoming more frugal," said Adkins, who lives in Austin, Texas. He said the coupons they get in Valpak envelopes offer consumers justification to spend money because they're saving at the same time.

Nationally, coupon redemptions stabilized last year after 14 years of decline and have continued to hold their own this year. Direct mailers like Valpak account for about 2.2 percent of coupon distribution.

Valpak, which is part of Cox Target Media, employs 1,200 people in Pinellas County, down about 100 from its peak five years ago. With the opening of its new $220-million facility off Interstate 275 in St. Petersburg, Valpak closed a North Carolina plant, eliminating 400 jobs there.

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.