Sale of UPI to Mexican Press Magnate OKd : Vazquez-Rana Will Pay $36 Million to $40 Million for Ailing News Service
A Mexican newspaper magnate won approval from a federal bankruptcy judge Tuesday to buy United Press International, the second-largest American news agency.
U.S. Bankruptcy Judge George Bason approved plans to sell UPI to Mexican publisher Mario Vazquez-Rana for between $36 million and $40 million. The purchase is expected to occur today.
Bason signed the order approving the sale after a hearing during which he was told that more than 90% of the news agency’s unsecured creditors had voted in favor of the deal in balloting that ended Monday.
The sale ends 13 1/2 months of bankruptcy for 79-year-old UPI and formally closes the sometimes wild, four-year tenure at the news agency of Douglas Ruhe and William Geissler, the two Nashville businessmen who bought the news agency for $1 and attempted to run it on limited funds.
$12.5-Million Cash Infusion
Vazquez-Rana, who owns 62 newspapers in Mexico, testified in court Tuesday that he had more than $29 million in an American bank Tuesday ready to transfer when the sale closes, probably this morning. Of that sum, Vazquez-Rana testified, he will immediately invest $12.5 million as working capital in the news agency.
Unsecured creditors owed more than $20 million will receive between 40 cents and 45 cents on the dollar, UPI attorneys said. And Jules Teitelbaum, attorney for the unsecured creditors’ committee, said: “We have a 99% vote of acceptance for this plan.”
Houston real estate developer Joseph Russo will own 10% of UPI after the sale is complete. Vazquez-Rana joined forces with Russo during the bidding for UPI last November to assuage U.S. fears of foreign ownership.
UPI executives--survivors of a two-year struggle during which employees suffered a 25% pay cut, management wrested control from the principal owners and the federal government tried to seize the news agency’s dwindling revenue--wore blue corporate ties to celebrate the court decision.
Wire Service Guild President William Morrissey said that, at one time, he had not expected that members of his union would receive all the money owed them, as they will under the Vazquez-Rana purchase.
Vazquez-Rana, testifying in Spanish, said that making UPI “great and prestigious is one of the greatest . . . dreams that I have.” When asked whether he was ready with the $29 million in cash required to assume control of the news agency, Vazquez-Rana said in English, “No problem.”
From 1963 until it entered bankruptcy proceedings last year, UPI had not made a profit. Details of Vazquez-Rana’s plans to make the news agency profitable have not been spelled out, but UPI has scheduled a news conference here today to discuss them.
Also uncertain is the fate of the agency’s current management, including Chairman Luis Nogales, who helped oust UPI’s controversial owners--Ruhe and Geissler--from operational control in 1985 and shepherded the company through bankruptcy.
Nogales said Tuesday that he would “only stay if I can play a significant role. And I really feel I have done my job.”
Vazquez-Rana testified that “I will try to get the most prestigious people in the news business to be in principal positions within UPI.” He also vowed that “UPI has always been an American news agency with headquarters in the United States, and it always will be.”
Despite the support for Vazquez-Rana expressed in court Tuesday, the Mexican publisher’s bid for UPI hardly won universal acclaim.
Old questions resurfaced about his ties to former Mexican President Luis Echeverria, whose theories on the benefits of controlled news media troubled many American journalists. Vazquez-Rana acquired his Mexican newspaper empire, the El Sol chain, from the Mexican government out of a bankruptcy proceeding at what some have charged was a bargain price. But no firm proof has surfaced supporting the rumors about Vazquez-Rana’s ties to Echeverria, and the publisher denies any special connection to the former president or to any other political interest.
Vazquez-Rana’s bid for UPI also had detractors on financial grounds. One losing suitor, a consortium of American companies led by one-time Santa Monica-based Financial News Network, filed suit to have the bidding for the agency reopened, arguing that its offer would be of greater benefit to unsecured creditors.
The FNN group also joined forces with Ruhe and Geissler, who opposed the Vazquez-Rana bid because it paid them nothing for their stewardship. Ruhe and Geissler bought UPI from its founder, E. W. Scripps & Co., in 1982 and, aside from the $1 purchase price, never invested any of their own funds in it.
After they directed the company not to pay its payroll taxes for the fourth quarter of 1984, they were ousted by management and by Los Angeles-based Foothill Capital Corp., then UPI’s principal financier. The company filed for bankruptcy protection after the Internal Revenue Service, trying to collect the back taxes, moved to seize its revenue.
UPI is one of the few news agencies that tries to make a profit from selling a news service. The other major American wire service, the Associated Press, is a nonprofit cooperative owned by newspapers.
