A planned sale of the Riverside Press-Enterprise to the owner of the Orange County Register has not yet closed three days after the deadline, according to the newspaper’s current owner.
In a statement published after the close of the stock market, publisher A.H. Belo said that the $27.25-million deal was still pending and that the company would consider suing Freedom Communications, the parent company of the Register, to ensure the acquisition’s close.
“A.H. Belo and the Press-Enterprise Co. are perusing multiple options to promptly consummate the disposition,” the statement said. A spokesman for Freedom did not immediately respond to a request for comment.
In addition to legal action, Belo said it was still open to honoring the deal as agreed upon. A third option, it said, would be to talk to other potential buyers about a sale.
Early last month, Freedom, which is run by former greeting card company executive Aaron Kushner, announced its plans to purchase the Inland Empire’s largest paper with considerable fanfare.
The move was greeted with great enthusiasm in the newspaper industry, which viewed the acquisition as a positive sign that Kushner’s plan to buck declining newspaper revenues with investment in growth had been paying dividends.
In the past year Kushner, who bought the Register along with two other Southern California papers in July of last year, has hired hundreds of reporters, created new sections and opened a new paper in Long Beach. The Press-Enterprise, with the potential for cost-reducing synergies and expanded reach, seemed of a piece with that plan.
On Nov. 1, however, Belo said that the deadline to close the deal, set for Oct. 15, had been pushed forward to Nov. 15. Several other terms of the deal had been amended as well, including a provision requiring Kushner to show he was financially solvent and current on his financing. In addition, he was obliged to put down $1 million in cash to keep the deal open; that money would not be refundable should the sale fall through.
Late last week, Belo asked Press-Enterprise employees to fill out time cards only through the beginning of this week, according to numerous sources at the paper, an indication that a transfer of ownership was imminent.
Yet the Nov. 15 deadline passed with no news. The new release is the strongest indication yet that Kushner is having difficulties closing the deal, and comes amid mounting rumors that his company is having money woes.
Freedom stopped contributing to employees’ 401(k) retirement plans early this year, and Kushner has acknowledged that its papers have missed multiple financial targets and have not been profitable this year to date.
Kushner financed the acquisition of Freedom, which cost $50 million plus the assumption of more than $110 million in pension obligations. The lender, Crystal Financial, specializes in lending money to corporations with challenging financial fortunes and charges accordingly high interest rates.
The Register’s circulation has measurably slipped since Kushner acquired it, particularly for the Sunday edition, which represents a significant portion of newspaper revenue because of the number of advertisements it carries.
In addition, Kushner has been taken to court several times over aspects of the Freedom acquisition. Last month investment firm Angelo, Gordon sued over $17.5 million from that deal that Kushner has refused to pay. (Angelo, Gordon is a part-owner of Tribune Co., which owns the Los Angeles Times.)
Belo did not elaborate on the possibility of suing Kushner to enforce the terms of the sale agreement beyond saying that it would use litigation “to enforce the terms of the [purchase agreement].” If the deal were to fall through, Belo would presumably keep the $1 million that Kushner already pledged.
If the deal to buy the Press-Enterprise falls through, it could be a serious black mark on Kushner’s project and endanger his chances of receiving future financing.
For Belo, meanwhile, a blown deal would be a very public embarrassment. The company has been attempting to unload the Press-Enterprise for some time, and chose Kushner as a negotiating partner over numerous media companies with far more experience in the business.
“I want to sincerely thank all of the employees of the Press-Enterprise for their unwavering support and dedication during this process,” Jim Moroney, president and chief executive of Belo, said in the company’s statement. Belo also owns the Dallas Morning News and the Providence Journal.
Shares in Belo (AHC) rose 10 cents to $7.30 on the New York Stock Exchange Monday and remained unchanged in after-hours trading.