Sun Joins a Growing List of Papers That Investors Aim to Take Private
Friday, October 27, 2006
A group of Baltimore business leaders headed by longtime politico Ted Venetoulis is angling to buy the Baltimore Sun, becoming the latest speculators aiming to rescue newspapers from the earnings grind of Wall Street and deliver them into private ownership.
Venetoulis, a Democrat and former Baltimore County executive, said it would be the group's goal to return the Sun and its smaller community newspapers to local control and restore the paper's reputation to a time when it had "oomph and quality and broadness."
Venetoulis joins a growing list of boldface names bidding for publicly owned newspapers. Hollywood producer David Geffen has made noises about buying the Los Angeles Times. Retired General Electric Co. chief executive Jack Welch is reportedly forming a group that aims to bid for the Boston Globe, owned by the New York Times Co. A wealthy Hartford, Conn., family has expressed interest in Tribune Co.'s Hartford Courant, should it be put on the block.
Though private ownership extracts newspapers from the constant growth demands placed on a publicly traded company, the private equity world is populated by corporate breakup artists who zero in on ailing businesses and ride them to the ground. Such ownership gives journalists nightmarish visions of empty newsrooms and shopper-thin dailies filled with wire-service copy.
"Newspapers are frisky ventures these days," Venetoulis said in an interview yesterday, referring to the industry-wide drop in circulation and advertising revenue as more readers move to the Internet, cable television and other forms of information delivery. "Everyone [in the investment group] needs to understand this may not be the best business venture around and the return may not be what they expect. This is part civic responsibility."
Other members of his consortium, called the Baltimore Media Group, include longtime Baltimore civic leader Walter Sondheim Jr. and Robert C. Embry Jr., president of Baltimore's Abell Foundation, which has expressed interest in the Sun and was founded by the families that once owned the Sun.
While Venetoulis and his partners voice interest in the public mission of news, not all potential newspaper investors do. Others are more interested in squeezing papers for profit.
Tribune, with headquarters in Chicago, is being roiled by a boardroom war that threatens to split the company. A group of board members unhappy with the company's performance has forced Tribune to essentially hang out a "for sale" sign for the company as a whole or its individual properties. Tribune set today as the deadline for bids.
Carlyle Group, based in the District, is among the private-equity firms interested in Tribune, said a private-equity executive who has examined media deals and requested anonymity because he is involved in ongoing transactions.
Most large newspaper companies, such as Gannett Co., McClatchy Co., The Washington Post Co. and the New York Times Co., are publicly held, and Wall Street demands strong quarterly earnings growth. But as newspapers have struggled with declining circulation and advertising revenue for more than a decade, along with volatile newsprint costs, the industry has fallen into disfavor on Wall Street. Shareholders have grown increasingly unhappy after becoming accustomed to profit margins of 20 to 30 percent that newspapers returned for much of the past century, when they had a virtual monopoly on local news and advertising.
But as news and information choices grew, newspapers have been forced to cut expenses and payrolls to keep profit margins high.
Now, a growing number of investors say the cuts have not gone far enough, and they seek to break up newspaper companies or sell them to private ownership to cash in their investment before the industry worsens.