Evening News Association, the company that owns Washington's Channel 9 WDVM-TV, The Detroit News and other media properties, is up for sale, the company said today.
Sources on Wall Street and in Detroit said Rosslyn-based Gannett Co. Inc. is the leading contender to purchase the company, estimated to be worth more than $600 million.
One source said he believes Gannett wants to buy the company's flagship newspaper, The Detroit News, and make it profitable by forming a joint operating agreement with Knight-Ridder Newspapers Inc., owner of the rival Detroit Free Press newspaper.
Both newspapers have been losing money for the last five years, as the competitors cut advertising and circulation rates and improved their news operations in pursuit of future profits.
A joint operating agreement would require approval by the antitrust division of the Justice Department. It would ensure the survival and profitability of both newspapers by allowing them to combine their business operations, but maintain separate editorial staffs.
Even if the two papers agreed to work together, buying into a two-newspaper market would represent a major change in strategy for Gannett, which has built the nation's largest newspaper chain by concentrating on monopoly markets.
Sources said CBS Inc., which is interested in acquiring WDVM-TV, its Washington affiliate, has received confidential financial information about ENA from that company's adviser, Salomon Brothers Inc. Other media companies that have received similar information about the company include The New York Times Co., Time Inc., Hearst Corp., The Tribune Co. and A. H. Belo Corp., owner of The Dallas Morning News and several television stations, sources said.
Washington Redskins owner Jack Kent Cooke has informed the company that he is interested in acquiring ENA's television stations, while Wesray Corp., a company headed by former Treasury secretary William Simon, also has asked for and received information about ENA, sources said.
Some dissidents among the company's 330 shareholders earlier this year began pressing to sell the company, which is controlled by descendants of founder James E. Scripps. ENA President Peter B. Clark, Scripps' great-grandson, had been resisting a sale to keep the company in family hands. However, he and other ENA directors changed their minds after two events earlier this week increased the pressure to sell, sources said.
Sources said the two motivating factors were a sweetened hostile takeover bid from producers Norman Lear and Jerry Perenchio, who are now offering to acquire the company for $1,250 a share, or $566.3 million, and heavy buying of ENA stock for $1,300 a share by Goldman, Sachs & Co. on behalf of an unknown investor.
In a letter delivered to ENA shareholders here today, Clark asked them not to sell their shares to Lear and Perenchio. He urged shareholders to hold onto their stock and promised to solicit other bids that would maximize the value of their shares.
"In view of your board's determination that the amended offer from Lear and Perenchio is an attempt to acquire control of the company at an inadequate price, your board of directors has determined that it may be necessary at this time to attempt to sell all or part of the company's properties in one or more transactions with the objective of providing all ENA shareholders with the highest price per ENA share," the letter said.
"The company's representatives and advisers are currently engaged in discussions with a number of third parties who have expressed serious interest in acquiring either the company as a whole or one or more of its operating properties."
The letter said Evening News' investment advisers have been ordered "to pursue all such discussions expeditiously and to report promptly to the board." It said ENA executives "are determined to pursue a course which we firmly believe will maximize value for all ENA shareholders on a basis that is more attractive than the Lear-Perenchio offer."
The explosion of takeover activity and a dramatic increase in the value of media company stocks this year also have contributed to the pressure to sell the Evening News company. Some ENA shareholders say they fear the company is worth more now than it will be in the future. ENA repurchased stock from some shareholders last December for $250 a share, but the company's shares have changed hands this week for $1,300 a share.
Longtime observers of the fierce newspaper war here between The Detroit News and The Free Press believe the fight will end when ENA is sold. They believe that any new buyer will ask Free Press owner Knight-Ridder to declare a truce and work together.
The News has been winning the war, but losing millions in the process. It has about 60 percent of the total advertising in the two papers as well as a 20,000 circulation lead over the Free Press. Both papers have daily circulations of more than 700,000.
Critics of ENA management have complained that the company has been spending money on the newspaper war and has sacrificed capital investment in its profitable broadcast operations.
According to documents filed in a lawsuit against the company by an employe who was fired for leaking confidential financial information to Lear and Perenchio, ENA's broadcast division generated profits of about $29 million last year while The Detroit News lost more than $8.5 million. The court papers said The Detroit News was budgeted to lose $11.5 million this year while the broadcast operations were expected to generate profits of $32 million.
Free Press officials have confirmed that they also have been losing money in recent years in an effort to win the newspaper war. They have indicated that they would be interested in ending the losses by entering into a joint operating agreement.
In addition to WDVM and The News, ENA owns television stations in Tucson, Mobile, Ala., and Austin, Tex.; radio stations in Detroit, and smaller newspapers in California and New Jersey.