Struggling with losses and sorely in need of capital, the Los Angeles and San Diego Business Journals are being sold by parent American City Business Journals to a Kansas City, Mo.-based investor group that will pump "several million dollars" into the weekly business publications over the next two years, ACBJ said Thursday.
But the company, which is also based in Kansas City, said the sale agreement would be voided if it can find a buyer by Jan. 31 for all 36 of its weekly newspapers. Last September, ACBJ retained two investment banking firms to find such a buyer. "There are a couple of people still looking at us," chief financial officer Cliff Donnelly said in a telephone interview.
Donnelly said the sale will keep the two papers' losses off the parent company's consolidated income statements for the fiscal year ending Dec. 31 and will relieve ACBJ of meeting the papers' additional capital needs. The parent will continue to manage the newspapers under a contract that entitles it to 50% of future profit.
Minimizing its 1987 loss is important for ACBJ, said Dennis Hudson, director of research at George K. Baum & Co., an investment firm in Kansas City. Before the sale announcement, Hudson expected ACBJ to report a $15-million loss for 1987. The San Diego and Los Angeles newspapers would account for about $3 million of that anticipated loss, Hudson said.
"They are the two biggest losers in the group" of ACBJ's 36 newspapers, Hudson said. Although he expects ACBJ to turn a profit next year, only about 12 of ACBJ's papers are nocurrently profitable, Hudson said.
ACBJ acquired the San Diego and Los Angeles weeklies and eight other business publications from Scripps Howard last year for $24 million in stock, part of ACBJ's rapid expansion through acquisitions and start-ups.
Investors Not Identified
Donnelly's office said San Diego Business Journal's paid circulation was 6,624 as of this week, up from only 2,100 this time last year, according to the prospectus for last year's acquisition. Los Angeles' paid circulation this week was 16,283, Donnelly said, up from 3,800 a year ago .
ACBJ did not disclose full terms of the sale nor did it identify the members of the investor group. Donnelly said the new buyer will pay $700,000 cash for the two papers, with the balance of the acquisition cost to be taken back in a note by ACBJ. Donnelly would not disclose the note amount.
Donnelly said there will be no layoffs or administrative changes at the two business journals, whose total staff had been increased by more than 50% during 1987. Closing of the sale is expected Jan. 31. The San Diego weekly began publishing in 1980 and the Los Angeles paper in 1979.
"This is the best thing that could have happened to this newspaper," San Diego Business Journal Publisher Ted Owen said Thursday. "Everyone is in there fighting for seed money. By us being set aside, we have an investor willing to invest a lot more money in us than the parent corporation would have."