An unnamed entity sent a letter of intent to buy the East Valley Tribune last week, but a second potential buyer has made it clear that he intends to make a bid for the newspaper in the near future.
Steve Hadland, CEO of the Santa Monica Media Company, said he is still pursuing the purchase of the Tribune. He said an offer he made at the end of August was still on the table and that the deal included a pre-bankruptcy down payment. He said the down payment was small, but he declined to disclose the amount.
“We are still actively seeking the deal,” he said. “We believe we have an executable contract to buy the Tribune, the Ahwatukee Foothills News, Arizona Interactive and the Daily News-Sun in Sun City.”
For details of that pre-bankruptcy offer, go to http://azcapitoltimes.com/azpolicywonk/2009/09/15/a-last-ditch-effort-to-buy-the-east-valley-tribune/
Hadland said he intends to submit a bid if Freedom Communications presents the new buyout offer, which was announced Nov. 20, to a bankruptcy judge. He said the purchase offer by the unnamed entity was a stalking-horse bid, which is known in investment circles as an initial bid on a bankrupt company’s assets to prevent low-ball offers.
“Frankly, the intent was never to shut down the Tribune,” he said. “It’s just that they had to give the 60-day notice as required by law.”
Hadland said he thought he had struck a deal with Freedom executives back in August, but then “they pulled the rug out from under me.”
“I met with them in August, and we were hell-bent on working out the deal,” he said.
Hadland’s company also had made a bid for the Tucson Citizen several years ago, but the deal never materialized.
The Tribune has failed to turn a profit in at least two years, and it has laid off almost half of its staff in an effort to cut costs. It tried several other desperate measures, such as switching the format of the paper to a tabloid from a broadsheet and starting free distribution. The paper also stopped daily circulation and began publishing three days per week.
Hadland said he would like to make several changes if he were to gain a controlling interest in the Tribune. Foremost, he said he wants to restart daily circulation and charge for subscriptions. He said he’s thought about making the Sunday edition free.
“I think putting it back in daily circulation is critical,” he said. “I’d want to expand. Obviously, the newspaper has to make money, but at the end of the first year I’d like to put more reporters on the street and make sure there was more advertising staff out there.”
Hadland said he doesn’t make decisions in a vacuum. “Before I make decisions, I talk to editors, reporters and people on the streets.”
Asked how he intends to make that happen and how he’d be different than others who have talked about similar strategies, he said avoiding the mistakes of many big corporations would be the first step.
“Big corporations have all sorts of corporate charges they lay on their newspapers,” he said. “There is overhead you have to pay corporate, and I’ve never seen a paycheck like the ones they pay their corporate publishers. Wall Street was the worst thing that happened to the newspaper business.
“At the end of the day, if the paper does well, I do well. Everything has to be reinvested in the paper right now.”
Hadland recalled buying newspapers in L.A. for a dime and said it’s ridiculous to ask readers to pay more for each edition and then give them half the news they once had. To make things work, he said, papers need to “go back to the basics.”
“I don’t know all the answers, but I know where to start,” he said. “Find some really talented people and go back to the basics. Cover national news, local news, national sports and local sports. I’ve watched newspapers put out all sorts of goofy sections, and I wonder what’s this all about.”
Hadland said it’s clear that Freedom’s creditors, such as JP Morgan Chase, are calling the shots now and that the corporation is no longer in control of the situation.
So, what’s the next move?
“Freedom will put a contract on paper and put it before the bankruptcy judge,” Hadland said. “Others will have an opportunity at that point to bid against them. We will be there as an active bidder.
As for the deal he was working on three months ago, Hadland said: “We have counsel in Delaware to find out what rights we may have under the former contract.”
When will we know what’s going to happen to the Tribune?
“I would guess they are going to move very, very quickly,” he said. “They want to get it done by the end of the year.”