WPO to Acquire Celtic Healthcare

Recently, The Washington Post Company ( WPO - Analyst Report ) announced its intention of holding a majority interest in Celtic Healthcare Inc. – a company engaged in home healthcare and hospice services in the northeastern and mid-Atlantic regions. The financial terms of the acquisition was not revealed.

WPO’s step to acquire Celtic Healthcare will offer its customers a wide range of services in the healthcare industry. Management believes that the company is focusing on diversifying its business into many areas having individual identity of each business, but with a common goal and value for all.

WPO’s education and publishing industry has long been grappling mainly due to economic meltdown. The company recently posted second-quarter financial results, in which Education division’s revenue went down 9% to $558.4 million, and Newspaper Publishing revenue came in at $151.8 million, down 7% from the year-ago quarter.

As a result, to mitigate declining revenues and shrinking market share, WPO is taking initiatives to diversify its business model by adding new revenue streams for making itself less susceptible to economic conditions. Therefore, the company’s intention to acquire Celtic Healthcare is in sync with its current strategy of operating a diversified portfolio.

Moreover, management believes that the acquisition demonstrates the company’s focus on investing in companies that has solid earnings prospective in the long-term along with a good management team.

Formed in 1877 and based in Washington, D.C., The Washington Post Company is a diversified media and education company. Kaplan’s (company’s subsidiary) strength in recent years has come from both rapid internal growth and acquisitions.

These acquisitions include education businesses in overseas markets (Canada, Ireland, Australia and China). We expect Washington Post to continue the acquisition spree while focusing on profitability.

Currently, we maintain our long-term Neutral recommendation on the stock. However, The Washington Post Company, which faces stiff competition from The New York Times Company ( NYT - Analyst Report ) , carries a Zacks #5 Rank, implying short-term Strong Sell rating for the next 1-3 months due to lack of any near-term catalyst.