Union-Tribune Sold to Private Equity Group Teaming with Black Press, Long-Time Rumored Buyer

The Union-Tribune announced this morning that it has been sold for an undisclosed price. The buyer was announced as a Beverly Hills private equity firm, Platinum Equity. However, a member of the Platinum Equity "team" is Vancouver's Black Press, whose chief executive and acquisition assistant have been spotted at U-T headquarters several times. Black's possible role has been discussed on this blog numerous times, but the company has never responded to inquiries. The company that owns the Toronto Star, Torstar, owns slightly less than 20 percent of Black. The acquisition appears quite similar to the 2007 deal in which Copley Press sold its Illinois and Ohio papers to GateHouse Media of upstate New York. At the time, GateHouse was very heavily leveraged. It had gone public and made a raft of newspaper acquisitions quickly. It was controlled (and still is), by Fortress Investment Group, a combination hedge fund/private equity group. GateHouse clearly did not have the money to pay the near-$390 million price for the Copley papers. The money was forwarded by Fortress. But both GateHouse and Fortress fell on hard times. GateHouse stock was $17 a share at the time of the transaction. This morning, it was trading at 7.5 cents. It has lost massive amounts of money. Fortress, meanwhile, once a Wall Street darling, plunged from a high of $16 over the last 52 weeks to a low of 77 cents. This morning, it is trading at $1.83, up 14.47 percent. Private equity groups came on hard times as lending froze. Right now, however, there seems to be moderate confidence that the banks might pull out of the mire, partly because of an accounting change expected later this week that will modify so-called "mark to market" accounting procedures for assets. Privately-held Black Press has had a tough time, as have other newspaper chains. That's why it appears that Platinum has essentially provided the money for the purchase. Black may well run the company. It could do printing and certain layout functions from a remote location, thus not burdening itself with the U-T's outdated equipment. Whether it will go partly- or entirely-online, and only have a printed edition a few times, or perhaps one or no times a week, is uncertain at this time. Black Press has alternative papers in its Vancouver markets, featuring racy material. However, its standard newspapers are not garish in nature. Platinum fashions itself as a turnaround expert, buying troubled companies in troubled industries, such as the newspaper industry. We will provide more information as we dig it up.


Don, I've been using your insights to follow the U-T's travails for many months. How do you think the notion of foreign ownership of an S.D. institution will play in an age when "hyperlocal" is the common wisdom of the moment?

What IS that I shaking sensation? Oh it must be James and Helen Coply spinning in their graves!

Well, now that that's settled... Don, curious about your take now on the impending "reduction in workforce" that was announced by the U-T a few months back. Based on your experience, is that now more likely to occur before this sale closes in Q2, or will the Platinum Group be more likely to want to make those determinations themselves, once they're fully in charge?

I think there are going to be many unhappy campers in the UT's future.

I see pay and benefoit cuts, and turnmoil ahead, at least until this recession/depression ends (I am calling an end in the 3rd to 4th quarter of 2009).

ADD: PLATINUM CEO IN FORBES 400, HAS HAD TITILLATING PRESS COVERAGE FOR AFFAIR INVOLVING BROTHER'S WIFE. Matt Potter, sleuth for the Reader, has come up with some interesting information on Platinum Equity, the Beverly Hills private equity firm that has bought the Union-Tribune. It is run by Tom Gores. According to Forbes Magazine last fall, Gores is worth $2.5 billion. He was born in Israel and raised in Michigan. Platinum "rebuilds distressed companies, flips for profit," says Forbes. It now has 22 firms with combined sales exceeding $13.5 billion. Last year, Gores got lots of press during the government's trial of Hollywood private eye Anthony Pellicano. Gores was having an affair with his brother's then-wife Lisa. (Gores's brother Alec is worth $1.3 billion, says Forbes.) On April 1 of 2008, the Huffington Post reported that Ms. Gores took the stand and testified about her affair with Tom Gores. She thought she was being trailed during one rendezvous in the Beverly Hills Hotel, and told Tom Gores. Later, Tom, Alec and a third brother met to talk things out with her, and all decided to end the affair. Best, Don Bauder

Response to post #1: Platinum is an asset flipper, not necessarily a stripper, but it will certainly do some chopping. Black Press will run the U-T, in my judgment. Black's Canadian papers certainly concentrate on local news. I would think it would go in that direction. Best, Don Bauder

Response to post #2: Yes, there may be some spinning in the crypts. My guess is that both Jim Copley and Helen Copley would have elected to keep the paper and try to battle the problems. Remember, however, that during each's lifetimes, the daily newspaper industry was not under siege, as it is now. They may have cut and run, too. Under Black Press and Platinum, some tough decisions must be made: 1. Will the U-T go all- or partly-online? 2. How often will a print edition come out? 3. How many heads must be chopped to bring the company to profitability? (That assumes it is now in the red -- my opinion.) 4. What can be done about the U-T's lack of a complete pagination system and its antiquated presses? There are many more. It's not known whether the La Jolla real estate is part of the deal. Best, Don Bauder

Response to post #3: I would think that Copley would leave those decisions to Black. Black, in turn, must make decisions on whether to go all- or partly-online, and whether there will be a printed edition. Those decisions may well be critical before the layoff decisions can be made -- or, at least, the editorial layoff decisions can be made. Best, Don Bauder

Response to post #4: The U-T was going to make some layoffs in February and didn't do it. I think that will now be left to Black. One employee was quoted saying today in Editor & Publisher, "There hasn't been any leadership, we've had an absentee owner for a long time, now someone's going to come in and try some new things. I think that makes people cautiously optimistic. Another employee said that new ownership is "better than just hanging on with [David] Copley." Best, Don Bauder

Inquiring minds want to know: • Have we seen the last “A Copley Paper” on the mast and editorial page? • Is David no longer the publisher? • Is Jim Copley’s picture coming down immediately from the lobby? • Is Helen’s picture coming doen from over the employee entrance?

I wonder how fast the executive management will go? Is I Dream of Genie Bellboy gone? Newsdoll Karin Winner? Advertising's Scott Whitley? UT-QT Bobbie Espinosa??

Response to post #10: Once the deal closes in the second quarter, the U-T would no longer be a Copley paper, David would no longer be publisher. The new owners might elect to leave the photos of Jim and Helen Copley in place. Best, Don Bauder

Response to post #11: Bell has already announced he would leave after the paper is bought. I would think there would be major changes in editorial management, including Winner and those immediately around her. Whitley and Esponosa? Dunno. Best, Don Bauder

FYI-- as "reported" earlier, the Borrego paper has now officially been sold as well, according to the U-T.

Response to post #14: Earlier, the U-T said the Borrego Sun had "reportedly" been sold. If the deals for the U-T and Sun go through as contemplated, David Copley will be free of any responsibility. The top executives of Copley Press will get out with huge platinum parachutes, I am told on excellent authority. (Maybe that's why the name "Platinum" had so much appeal.) Best, Don Bauder

Here's a tough one for ya, Don: If you were Platinum and looking around the country for possible candidates for the top UT editorial job, where (and at who) would you look? Are there any up-and-comers you know of that have the chops to turn around this Edsel of Journalism?

Here's a pic of Karin explaining the consequences of the sale to the newsroom:

www.imagehosting.com/"><img src="http://img502.imageshack.us/img502/7752/winner2.jpg

I wonder how fast the executive management will go?

By HellcatCopley

They're ALL DOA. Wait and see.

Response to post #16: So much depends on whether the concentration will be on the online edition, or the company tries to slog along with its print edition. Certainly, the next editor should be someone who would not surround himself or herself with cronies and would not make decisions based on personal likes and dislikes. The next editor has to understand the analytical approach -- studying the market, listening to surveys and focus groups, etc., instead of ignoring the results. The company needs a basic strategy. Every department should try to reach the same goal -- profitability. It will take a whole new culture. The company has had a top-down, militaristic culture that does not work. I don't have a specific name, but here is where I would look: NY Times, Washington Post, some top editors that left Dow Jones when Murdoch came in. Best, Don Bauder

Response to posts #17 and 18: Platinum considers itself expert at reviving moribund companies. Generally, that's not done by retaining executives responsible for long strings of blunders. Best, Don Bauder

Response to posts #19 and 20: One of many mistakes made by current management was chopping heads of the Indians and retaining the chiefs, who became far too numerous. And many chiefs were sadly lacking in vision and basic journalism skills. New ownership will probably see this. Best, Don Bauder

I predict many U-T Reporters will lose their jobs and be replaced with Canadians who want to work in the US to obtain a green card. A similar situation ocurred when Peter Jennings took control of ABC News. Many of the US reporters were let go and replaced with attractive young Canadian women whom Jennings then put in his personal stable.

What do we really care if one of the Platinum execs was sleeping with his brother's wife? (I'm not even sure I got that right: it's like, so off-point.) What I want to know is: when will Bob Kittle exit and where will he go?

Here is the contact page for Black Press execs: http://www.blackpress.ca/corporate/contact.php

You could tell the UT was under bad management when the then editor in chief basically said, in the 80s, that the paper would run comic strips he liked, and damn what anybody else said. That is no way to appeal to a larger audience.

When Black Press takes over look for changes on the comics pages.

Response to post #24: You may be right. One thing that bothers me is that Black Press basically owns very small papers in Canada. Does it have people who could step into major slots at a large daily? Best, Don Bauder

Response to post #25: That story about Gores sleeping with his brother's wife was very big in L.A. during the Pellicano trial. (Maybe it was Gores's major exposure to the mass media.) As to Kittle: the new buyer will have to size up the credibility of the U-T, and just how much the lack thereof influences the poor circulation and market penetration. The buyer should find out whether San Diegans believe the U-T when it writes about the establishment. Then the buyer will have to decide who goes and who stays. Best, Don Bauder

Response to post #26: Was Snuffy Smith the U-T editor who made that appalling comment? Or Sergeant Snorkel? Best, Don Bauder

If the new owners are smart they are going to worry less about credibility and more about who or what attracts readers. In either case, adious, Kittle.

When Black Press takes over look for changes on the comics pages.

By mythusmage

If the paper does NOT have 1) Marmaduke, 2) Dilbert and 3) Bliss, then I dont buy it. Those 3 are MANDATORY COMICS!

My comics are serious business, and I read those 3 every single day.

Don - if you haven't seen it yet, here's an AP Business story from the Boston Globe's online site. It's a slightly different take on the announcement with a couple of interesting quotes from Gene Bell and Karin Winner.


Asked at a staff meeting Wednesday whether the newspaper was profitable, Bell said he didn't want to answer, then, after a pause, "It depends on the week."

I think that confirms it, the UT at BEST was breaking even.

The San Diego Union will join The Honolulu Star-Bulletin, Hawaii’s second largest daily, in the Black Press collection. Since they have owned the Star for many years, I would speculate that looking at the what has happened at the Star could be telling to the future of the UT.

Black Press also owns usedeverywhere.com, a free classified ad website for selling and buying used items in the US, UK and Canada. (A competitor to Craig list, so to speak.)

Response to post #30: Agreed. Pleasing the readership and potential readership is most important. But achieving credibility with key audiences is one way to do that. The people who helped destroy that credibility should be on the bubble. Best, Don Bauder

Response to post #31: One of the less pleasant aspects of being in the newspaper business is finding out that readers care more about comics than about news, interpretation, opinion on serious local, national, and world events. Best, Don Bauder

Response to post #32: The best quote in that story is Gene Bell, when asked if the company was profitable, pausing and finally uttering that it depends on the week. Earlier, Platinum had said the paper was barely profitable. So much depends on accounting procedures. And whether cash flow is negative or positive. I will go with what I have said for some time: I think it is losing money and cash flow is negative. Bell's statement buttresses that opinion. Best, Don Bauder

Response to post #33: I think it confirms that the paper was indeed losing money. Best, Don Bauder

Response to post #34: Black Press owns a bunch of tiny papers, mainly in Western Canada. The Honolulu paper is far behind the leader in that market. The Akron Beacon-Journal used to be an excellent paper. It has declined considerably, but that may not be Black's fault. The Akron metro area has slumped badly, similar to nearby Cleveland, which is almost as much of a wasteland as Detroit. Does anybody at Black know how to run a metro daily? But then, did Copley? Best, Don Bauder

One of the things nobody is talking about is that apparently Copley Press is maintaining minority ownership and getting a slice of revenue. Do you have any idea what the percentage might be? Also, the thought crossed my mind that the $15 million (or more) "purchase" price might be for only a 51 percent ownership, and that figure would not be a "fire sale" after all. Your thoughts?

One of the things nobody is talking about is that apparently Copley Press is maintaining minority ownership and getting a slice of revenue. Do you have any idea what the percentage might be?


Also, the thought crossed my mind that the $15 million (or more) "purchase" price might be for only a 51 percent ownership, and that figure would not be a "fire sale" after all. Your thoughts?

By JustCurious

There is no way they are buying a 51% interest, I also wonder why (if this is true) they would even allow Copley a small % of ownership with a slice of profits-the UT is broke.

If this company does indeed turn the paper around they are not going to share that value added benefit with David Copley who has contributed nothing.

Response to post #40: I just read today about Copley retaining a minority ownership. I seriously doubt that it is as big as you suggest. Even if Copley retained 49 percent, the $15 million or even $45 million would be a fire sale price compared to a couple of years ago. Remember, Copley in early 2007 sold several Ohio and Illinois papers that were losing money slightly at the time, and accounted for a collective $159 million in annual revenue, for almost $390 million. The U-T has perhaps $200 million -- tops $250 million -- in revenue and is probably losing money, but narrowly. No matter how you slice it, it is a fire sale by standards of just a couple of years ago. Best, Don Bauder

Response to post $41: I agree. If Copley retains any ownership, it is wee. See post above. Best, Don Bauder

Remember, Copley in early 2007 sold several Ohio and Illinois papers that were losing money slightly at the time, and accounted for a collective $159 million in annual revenue, for almost $390 million.

Don, what do you think the UT could have been sold for in 2006/7? Or even earlier, like 2000?

Response to post #44: It is said the U-T had $100 million in cash flow circa 2004. That would have made it worth $1 billion. That's why Forbes had David Copley on the Forbes 400, worth $1.5 billion. The U-T was worth a billion, the Ohio and Illinois papers worth possibly something close to half that. David should have had money in investments, but those weren't included in the calculation -- just the value of Copley Newspapers at that time. Best, Don Bauder

It is said the U-T had $100 million in cash flow circa 2004. That would have made it worth $1 billion. That's why Forbes had David Copley on the Forbes 400, worth $1.5 billion.

$1 billion dollars!

Shocking, it is shocking that much value was lost.

Just as shocking of course, in an inverted relationship to papers, is the amount of value start up internet companies generated-even after the tech bubble burst.

Internet the emerging industry, and daily papers the dying industry.

Progress waits for no man. A natural part of life.

Response to post #46: Back in the 1980s, the late Larry Lawrence publicly offered Helen Copley a billion dollars for the Union and Tribune. (She would have had to hire a forensic accountant to trace the source of his money, but that's another story.) Then in 2004, the U-T was clearly worth a billion. Fast fall. But in a post above I revealed that revenue for the U-T's SignOnSanDiego peaked at $19 million a couple of years ago and is now at $17 million. So there is much work to do with the online operation. Newspapers haven't figured out how to make the Internet profitable. Best, Don Bauder

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