Just when you thought the market for buying and selling newspapers was all but dried up, news comes that Hearst has scooped up a bunch of dailies and weeklies on Connecticut's affluent Gold Coast.
But there's something odd about this deal. The seller is Hearst's frequent partner MediaNews Group. And just a few months ago Hearst announced that it was partnering with MediaNews to buy and run some of the papers.
A hint about what's going on may come in a statement from Joseph Lodovic, president of cash-strapped MediaNews, who said, "This transaction allows MediaNews to manage its balance sheet during a challenging economic environment and transfer ownership ... to a company we admire."
"Admire" is an understatement. The chummy Hearst-MediaNews relationship is fascinating, with the two companies co-managing some papers and Hearst investing money in MediaNews to enable it to buy others. Is it possible the Connecticut deal is a way for MediaNews to square its accounts with Hearst using newsprint rather than banknotes? And what does a transaction like this portend for Hearst's San Francisco Chronicle, which is losing more than $1 million a week and surrounded in the Bay Area by MediaNews papers? A lot of people have speculated that Hearst's San Francisco endgame might be to turn the Chronicle over to MediaNews–if antitrust regulators would permit such a thing. Will there be more trades between the two partners?
In the meantime, we have this interesting Connecticut deal, which must be making heads spin among the employees at a couple of the papers. Let's review: In March 2007, Tribune struck a deal to sell the Stamford Advocate and Greenwich Time to Gannett, but that deal fell through because of union issues. Last November, it was announced that Hearst was buying the two papers for $62.4 million–but with MediaNews managing them. Now, as part of the latest deal, Hearst has "assumed management" of the two papers, plus MediaNews' Danbury News-Times. In addition, Hearst gets ownership of several suburban weeklies and MediaNews' Connecticut Post (based in Bridgeport), the third-largest paper in the state.
No terms for all of this horse-trading were disclosed. But MediaNews bought the Connecticut Post in 2000 from Thomson for a whopping $205 million. Wanna bet the pricetag was a lot lower this time around?
I had the same reaction to this very curious arrangement. The departure of Ganzi from Hearst indicated to me that others inside Hearst also questioned what their company was doing making arrangements with Singleton. An alternative explanation I might have is that Billy Dean's debt-incumbered empire is clearly fast unraveling, and Hearst is moving to save what it can. But with either my suggestion, or yours, I would think debtors could accuse Hearst of being involved in some asset-stripping scheme should Media News end up in bankruptcy court.
Posted by: edward | August 08, 2008 at 12:59 PM