Rural Press managing director Brian McCarthy told Reuters in an interview the group's gearings would jump to about 80 to 85 per cent from the mid-30 per cent range currently because the acquisition was debt funded.

McCarthy said this higher gearing was not a concern as Rural Press' assets were conservatively valued and its interest cover would still be over four times earnings, down from about eight times. (not 12 times as previously stated).

Rural Press would increase its current A$200 million debt facility arranged by Westpac Banking Corp to about A$300 million, he said.

Rural Press would have about A$40 million spare once the acquisition was completed and the facility lifted.

``If we wish to make an acquisition up to that level (A$40 million), we've got it covered,'' McCarthy said.

``However, for anything larger than that, we'd need to look at our capital structure,'' he said.

The acquisition includes the daily Canberra Times newspaper and the give-away community newspapers The Chronicle and The Valley View.

The Canberra Times has daily Monday to Friday circulation of about 42,000, Saturday circulation of 71,000 and Sunday circulation of about 40,000.

Rural Press said the acquisition would be funded from existing cash flow and bank facilities and the earnings per share positive within the first year.

The Canberra Times group generated revenues of A$56 million in 1997-98 (July-June). Stokes' adviser Grant Samuel and Associates said the price paid represented a multiple of 11.2 times earnings before interest, tax, depreciation and amortisation (EBITDA) in 1997-98.

McCarthy said he could not disclose the earnings multiple paid for the group because it was subject to confidentiality clauses, but said The Canberra Times was just as profitable as the Rural Press' other regional publishers.

``Its EBIT (earnings before interest and tax) margin is not dissimilar to the EBIT margin we currently achieve out of our regional publishing division,'' he said.

A multiple of 11.2 times EBITDA implies Canberra Times made about A$14 million in earnings on A$56 million in revenues, implying an EBITDA to sales margin of about 25.5 per cent.

McCarthy said Rural Press was always on the look-out for acquisitions in Australia and overseas, but would concentrate over the coming months on integrating The Canberra Times into the group.

``At the moment we need to absorb The Canberra Times' operation into Rural Press and get it to perform to a level we want it to, so we've got enough on our plate for the next few months,'' he said.

``However if something bigger came along, we're always a willing buyer if there's a willing seller,'' he said.

McCarthy said he had not met with Canberra Times executives yet or visited its offices so he could not say what Rural Press' plans were for costs or editorial policy.

He said he expected to meet with them within the next week or two week to decide on plans to integrate The Canberra Times into the Rural Press group.

``It would be wrong to go into detail until I've done that.''

McCarthy said he expected the purchase would raise Rural Press' profile and be welcomed by investors.

``There's no doubt it will give us a higher profile, because apart from The Canberra Times being a very good newspaper, it circulates in a very influential part of Australia,'' he said.

``The reaction on the market I would think would not be negative because we have a proven record of making acquisitions and having them perform for us in a financial sense,'' he said.

He said it was too early to say whether The Canberra Times needed to focus less on federal political issues and more or less on local Canberra issues.

``It's a very interesting market where it needs to cover the issues of Australia on a national basis and there's no doubt about that, but it also has a local readership of people who want to read about their local community,'' he said.

``It's clearly a matter of judgement about the mix of news in the publication and until we get a better feel for the market and editorial side of the business, we'll just keep let it doing what it is doing well,'' he said.

``It's a difficult recipe, but we're also very aware that The Canberra Times has obligations and responsibilities to the local community,'' he said.

The Canberra Times under Stokes boosted its coverage of federal politics under editor Michelle Grattan in the early 1990s, but Grattan has since left and the paper is now covering local issues more prominently.