We know a lot more now about the deal that handed Donald Sussman, the hedge-fund mogul, progressive philanthropist, and husband of Chellie Pingree, 75 percent of thePortland Press Herald and its siblings.
First, we know HOW THE DEAL CHANGED, in less than two months, from a $3.3-million loan worth five percent of the company into a $3.3-million cash purchase of three-quarters of the equity. Greg Kesich, a columnist for the Press Herald who is the vice-president of the Portland Newspaper Guild and holds one of two union seats on the company's board of directors, says Sussman's proposal for a loan "didn't work for the private-equity investors," who wanted "a lot of guarantees about how they were going to get out." So the company diluted existing shares — including the employees who own part of the company. "We're part of the 25 percent that just shrunk, that used to be 100 percent," Kesich says. How come? Easy: "Everybody's betting that a smaller share of something is better than a big share of nothing."
Second, we know THE BUSINESS PLAN HAS NOT CHANGED. While union president Tom Bell was dismissive of a proposed takeover plan by Chris Harte, a former PPHpresident and heir to the Harte-Hanks media fortune, because it was "too reliant on print" and didn't include enough investment in new technology. (Also, it would have required crushing concessions from the union.) It's clear the existing model isn't working: circulation and ad revenue have declined for years. Kesich says the company will invest the new cash in a major technology upgrade that union president Tom Bell has described as integrating online and in-print publishing, as well as modern software for advertising sales and accounting. Bell suggests the move will take the company from running way behind in the media industry to being in front of the pack.
Third, UNION-SOUGHT EMPLOYEE RAISES HAVE NOT YET BEEN NEGOTIATED. Wage increases were tabled until this year in the contract approved last year. Kesich says they'll come up in the middle of this year. The rest of the contract is still in force as well, Kesich says, until its original expiration date in June 2013.
Fourth, we can be reasonably sure SUSSMAN ISN'T DOING THIS TO CONTROL A MESSAGE or push a political agenda. (Seriously, as has been noted by others, if he wanted to push a political message, would he buy a newspaper or ads on television?) "He says that he's investing in a community asset and he considers journalism to be a public good, as well as a business," Kesich says. "It benefits everybody whether they read it or not." (So declining circulation shouldn't bother Sussman.) In fact, Kesich suggests, "this is more a philanthropic move" than a business one, though he says Sussman wants the paper to be "self-sustaining."
• That's a lot of good info, but questions remain:
The Bangor Daily News has reported that CRG Partners Group, a Boston-based firm "specializing in restructuring troubled companies," was brought in to reorganize in the wake of Connor's departure, and was looking for $10 million in investments to pay off debt, and an additional $5 million for operating cash. SUSSMAN'S CONTRIBUTION IS TINY compared with those goals. (Not to mention a pending lawsuit over $125,000 in allegedly unpaid bills for paper.) Will $3.3 million be enough to turn a struggling company into a successful one?
While we take Sussman at his word that he'll stay out of editorial decisions, Kesich says "he's going to have a hand in making business decisions." WHAT HAPPENS WHEN BUSINESS CHOICES IMPACT EDITORIAL coverage? That's unclear — while Sussman has said in a written statement that he'll trust the editors and managers hired by the previous owners, at some point they'll leave and he'll hire their replacements. Kesich asks skeptics to "look at what we do and evaluate what we do."
Read this story online to learn more questions — some with answers.
Jeff Inglis can be reached at jinglis@phx.com.
Addendum
My column this week has some questions — and some answers — about the new incarnation of MaineToday Media, the owner of the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal, and the Central Maine Morning Sentinel.
I ran out of room in the paper to give you all the info I had, so here’s an addendum. (Also, I’m attempting to get an interview with Donald Sussman; fingers crossed on that!)
There’s been a lot of talk about EDITORIAL INTEGRITY as a result of this deal, in which Donald Sussman has bought 75 percent of the company for $3.3 million. We take Sussman at his word that he won’t get involved in the editorial board and daily news operations; if he proves us wrong, we’ll let you know. Also, Greg Kesich, the union veep and PPH columnist I spoke to this week promises, as union prez Tom Bell has in other interviews, that the union will advocate for journalistic principles if issues arise.
On that note, we already know that SUSSMAN WILL BE IN THE NEWS A LOT MORE than he is used to, as a result of this deal. He’s normally just a good-guy character, donating millions to progressive and community causes around the state. Now he’s opening himself to criticism, ridicule, and general widespread attention. The paper is looking at how best to handle DISCLOSURES ABOUT HIS OWNERSHIP when dealing with stories that might relate to him or his interests — or his wife and her political career. While under Richard Connor, that sort of owner-disclosure was rare (“we were told not to do it,” Kesich says), but since Sussman has gotten involved, that information has been regularly inserted in stories about Pingree.
What does the purchase price mean for THE COMPANY’S TOTAL VALUATION? Probably very little. It’s definitely not as simple as saying if $3.3 million equals three-fourths of the company, then the whole thing is worth $4.4 million. For one thing, the company owns land and a building in South Portland, valued by that city at $12.1 million (despite that number, it sold in 2009 for $7 million as part of the Blethens’ exit). The building is home to a printing press and other equipment valued at $6.8 million. And there are subscriber and advertiser databases, which are worth money to marketers, as well as the archival records, which are worth something to collectors and libraries. In the end, though, any company — like a home — is actually worth what it can be sold for, at the future date when it actually sells. So any calculation is unclear at best.
SUSSMAN HASN’T BEEN TO THE PRESS HERALD OFFICES yet. “He hasn’t set foot in the office yet,” Kesich said Friday. “I’m hoping that he will,” because employees whose jobs he saved want to meet him.
Say what you will about Richard Connor (we’ve sure said a lot here) and no-longer-prospective owner Chris Harte: both are extremely experienced at running profitable news operations. Their plans (Connor’s as implemented; Harte’s as proposed) included major changes that reduced the power, scope, and financial commitment to the union and its members. Which means they either saw NO WAY TO PROFITABILITY WITHOUT CUTTING union-related costs, or saw other ways but chose extended combat with the union as the easiest. Sussman has no experience managing a media company; will he find a way to preserve the union that the other guys, with decades more experience, couldn’t?
Say what you will about Richard Connor (we’ve sure said a lot here) and no-longer-prospective owner Chris Harte: both are extremely experienced at running profitable news operations. Their plans (Connor’s as implemented; Harte’s as proposed) included major changes that reduced the power, scope, and financial commitment to the union and its members. Which means they either saw NO WAY TO PROFITABILITY WITHOUT CUTTING union-related costs, or saw other ways but chose extended combat with the union as the easiest. Sussman has no experience managing a media company; will he find a way to preserve the union that the other guys, with decades more experience, couldn’t?
And lastly, WILL RICHARD CONNOR GET AWAY WITH HIS PLUNDER? He purchased the company for cheap, sold off almost all its real-estate, cut costs, allegedly rearranged the books to his own advantage, and then left town. Does he have personal — or criminal — liability for changes at the paper that slashed jobs, the salaries of those remaining, the paper’s reputation, and ultimately the community’s well-being?