AZ Policy Wonk

It appears three Californians had incorporated in Arizona in an effort to take over operations of the East Valley Tribune.

It’s not clear, because the date of incorporation was Aug. 25, whether the tentative deal to buy the Tribune is still being worked out. The agreement was to be inked by Aug. 31, but that deadline was not met.

The articles of incorporation could be a moot point. But the notice did include a new name; a Santa Monica Observer contributing writer, Rebecca James, had joined forced with Observer chieftans David Ganezer and Steve Hadland. In a previous blog post, I noted that Hadland and Ganezer were trying to swing a deal to buy four Arizona papers, including the Tribune, from bankrupt Freedom Communications.

And it’s still possible the Tribune will be sold through bankruptcy proceedings, as has been reported on other local blogs.

I just called the Santa Monica Observer, and asked for Ganezer, James or Hadland, and was told to “hang on just a second.” But then my call was redirected to a number that had been disconnected. A follow-up call reached an answering machine.

Here’s the public notice, which was signed Aug. 25 by James, Ganezer and Hadland:

Articles of Incorporation of Arizona Newspaper Group, Inc., An Arizona Corporation

1. Name: The name of the corporation is Arizona Newspaper Group, Inc, an Arizona Corporation. 2. Initial Business: The Corporation initially intends to conduct the business of newspaper publishing, printing, the sale of advertising and marketing services, website design and internet advertising, journalism and other related, lawful activities. 3. Authorized Capital: The Corporation shall have the authority to issue 10,000,000 shares of common stock. 4. Known Place of Business: (In Arizona) The street address of the known place of business of the Corporation is: Arizona Newspaper Publishing Group, Inc, c/o East Valley Tribune Newspaper, 120 West 1st Avenue, Mesa, AZ 85210. 5. Statutory Agent: (In Arizona) The name and address of the statutory agent of the Corporation is: Rebecca James, 120 West 1st Avenue, Mesa, AZ 85210. 6. Board of Directors: The initial board of directors shall consist of three directors. The names and addresses of the persons who are to serve as the directors until the first annual meeting of shareholders or until their successors are elected and qualified, are: Rebecca James, 120 West 1st Avenue, Mesa, AZ 85210; David Ganezer, 120 West 1st Avenue, Mesa, AZ 85210. 7. Incorporators: The names and addresses of incorporators are: Rebecca James, 120 West 1st Avenue, Mesa, AZ 85210; David Ganezer, 120 West 1st Avenue, Mesa, AZ 85210. The liability of the directors is eliminated to the fullest extent permissible under Arizona law. 8. Indemnification of Officers, Directors, Employees and Agents: The Corporation shall indemnify an person who incurs expenses or liabilities by reason of the fact he or she is or was an officer, director, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise. This indemnification shall be mandatory in all circumstances in which indemnification is permitted by law. 9. Limitation of Liability: To the fullest extent permitted by the Arizona Revised Statutes, as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for any action taken or any failure to take any action as a director. No repeal, amendment or modification of this article, whether direct or indirect, shall eliminate or reduce its effect with respect to any act or omission of a director of the Corporation occurring prior to such repeal, amendment or modification. Executed this 25th Day of August by all of the incorporators. Signed: /s/ Stephen Hadland /s/ David Ganezer /s/ Rebecca James Tel: (310) 452-9900 Fax: (310) 388-1235

Just prior to the Aug. 31 announcement that Freedom Communications Inc. was seeking bankruptcy protection, it appears there was a last-ditch effort to sell a large portion of Freedom’s assets in Arizona, including the East Valley Tribune.

It’s not clear whether any agreement is under consideration now – there was a deadline to act by Aug. 31 – but an industry source offered some details about how the deal was structured.

First, it would have been a two-phase deal that included the purchase of two commercial buildings, four newspapers, a marketing company and a web-design business. The deal would have cost the buyers $2 million, with a first-phase payment of $200,000 due by noon on Aug. 31. Because the deal didn’t close at that time, it’s not clear whether any arrangement is still in the works.

The four newspapers included in the deal are reported to have a total circulation of 100,000. They have about 265 employees.

The marketing company that would have been sold is The Clipper, along with a web-design company called AZ Interactive Media Group.

The first phase of the deal would have included everything listed above except for the two buildings, appraised at roughly $8 million, and three printing presses, which include a $4 million press purchased last year.

Phase two was supposed to close within 90 days.

But here’s where it gets interesting: The industry insider I spoke with said two California businessmen were behind the deal to buy Freedom’s Arizona assets. One was David Ganezer, of the Santa Monica Observer, and the other was Steve Hadland, who runs the Culver City Observer and is CEO of the Santa Monica Media Company.

Hadland was part of a failed acquisition bid for the Tucson Citizen earlier this year. Ganezer acted as company spokesman. The bid failed when Gannett Co. refused to accept less than $800,000 for the Citizen. The original asking price was $1 million, and Hadland reportedly offered about $500,000. The Citizen now operates as a web-only publication.

As part of the deal for the Freedom assets, the buyers would have assumed $100,000 cash and $1.5 million in receivables that were part of the Arizona newspapers’ financial portfolio.

But they also would have assumed an unkown amount of liability, which could include any outstanding debt and other liability costs. I was going to try to ballpark the deferred subscription liability based on subscription price, but because the East Valley Tribune is no longer subscription-based and charges only for delivery (if you don’t feel like picking up a free edition at various newsstands across the East Valley), it’s not clear how much the total deferred subscription liability would have been.

But any readers who had paid for delivery would be entitled to continue receiving their papers for the term of their delivery contract. Right now, the East Valley Tribune charges about $13 per month for delivery. The paper is published three days per week.

Ganezer and Hadland apparently were in communication with Freedom during the week prior to the bankruptcy filing, according to the industry source. They most likely worked out a tentative deal, at least in concept, and were trying to raise cash from investors.

I’m surmising that the agreement has fallen apart because, according to the industry insider, the deadline was not met. But that doesn’t mean the whole thing is off the table.

I have attempted to get in touch with both Ganezer and Hadland for comment. Ganezer called back but said he was not authorized to discuss the arrangement. Hadland hasn’t responded to an e-mail.

Lastly, it’s not clear which of the other Freedom papers in Arizona would have been part of the deal. The East Valley Tribune’s sister publications include the Ahwatukee Foothills News, the Daily News-Sun, Freedom Politics, Glendale Today, Peoria Today, Surprise Today and YourWestValley.com.

More information about the Culver City Observer can be found at http://www.culvercityobserver.com. More information about the Santa Monica Observer can be found at http://www.smobserver.com.

Full disclosure: I am a former East Valley Tribune editor. I left the paper in 2007 before the first round of layoffs in the newsroom.