Signs of life – and more cuts – in San Diego
After some nine months on the market – an amount of time that would have been unthinkable for a trophy paper like this just a few years ago – the Union-Tribune today was sold to Platinum Equity, a Beverly Hills buyout shop that specializes in turning around distressed businesses.
Back in the day, would-be purchasers would have swarmed the Union-Tribune and bid the price to the stratosphere. Prior to her death in 2004, just about every publishing CEO in America would schlep to La Jolla on his private jet once or twice a year to beg the late owner, Helen Copley, to sell the paper to him, money being no object.
But the paper, which reports that its sales have fallen by a staggering 40% since 2006, had languished on the market since July, a triple victim of skepticism over the future of newspapers, the collapse of the San Diego housing market and the cratering global economy.
The price Platinum will pay for the paper was not revealed, but the Voice of San Diego said real estate experts pegged the value of 13 prime acres owned bythe paper at more than $100 million. San Diego City Beat said the sale price was approximately $15 million, a number too low to believe if the estimated value of the real estate is anywhere near correct. The Wall Street Journal put the price at “less than $50 million,” which sounds more believable.
The prospective new owners gave some insight into their likely operating philosophy by announcing they will be advised by David Black, the acquisitive and efficiency-minded Canadian publishing entrepreneur who in recent years scooped up papers from Akron to Honolulu and encircled the struggling Seattle dailies with a network of seemingly prosperous weeklies.
Shortly after buying the Akron Beacon-Journal in the summer of 2006, Black reduced the newsroom staff by 25% and eliminated jobs in other departments throughout the plant. Earlier this year, Black cut the newsroom of the Honolulu Star-Bulletin by 18% as the paper was turned into a tabloid.
Together, Platinum and Black are poised “to bring a strong operational focus” to the Union-Tribune, according to a statement issued by Louis Samson, the Platinum executive who is piloting the transaction.
That bit of finance-ese means the new management will be seeking ways to wring fresh efficiencies out of the newspaper, which has undergone a series of staff cuts for the last three years to both respond to falling sales and groom its bottom line to appeal to potential purchasers.
The newsroom has been chopped by about a third to about 250 individuals from more than 350 people in 2007. In January, the company warned it might have to make further staff cuts and imposed mandatory unpaid furloughs, froze merit pay increases and suspended contributions to 401k accounts, according to this article in the paper.
These and certain other economies may be required by Platinum before it closes the deal.
Private-equity buyers like Platinum focus on cost cutting in the early days after they buy a company to be sure they are able to produce sufficient profits to repay the debt they borrow to finance a deal. If they fail to do so, the deal can go sour, as occurred in the bankruptcies that quickly followed the buyouts of the Tribune Co., Minneapolis Star Tribune and Philadelphia Newspapers LLC.
In the fullness of time, Platinum also would hope to raise revenues through improved sales management and an eventual uptick in the general economy. Financially oriented buyers like Platinum generally plan to sell a refurbished company for a handsome profit within three to seven years after they buy it.
With such papers as the Austin American-Statesman, Miami Herald and Chicago Sun-Times on the block, other bargain-hunting investors will pay close attention to this deal to see if it is something they want to try for themselves.
Who knows? If Platinum turns the Union-Tribune back into the sort of prized asset it used to be, that might put some life into the flat-lining shares of the publicly traded newspaper companies.