Workers Show Will to Buy Publisher : Media: An obscure clause has blocked the sale of Harris Enterprises and employees are studying ways to make an offer for the newspaper company.

Three years ago, Harris Enterprises Inc., which owns the Camarillo Daily News and 50% interests in the Simi Valley Enterprise and the Moorpark News-Mirror, put itself up for sale. Members of the founding family of the Hutchinson, Kan.-based company, who own a majority of Harris’ stock, wanted to diversify their holdings, and media properties at the time were fetching handsome prices.

Harris’ suitors included Thomson Newspapers and Ingersoll Publications. Several offers were made for more than $100 million. But in the final hours of bidding, a clause in the 1955 will of one of Harris’ founders was discovered. It required that an employee profit-sharing trust be given first crack at a buyout. Moreover, according to an arcane formula in the will, the employee trust might be able to buy the company for a mere $10 million.

The company, which owns nine other small-town newspapers and a radio station, all in the Midwest, was taken off the market. Ownership remained unchanged, and employees began wearing T-shirts that read: “Where there’s a will, there’s no way.”

Last November, the five employees who act as trustees to the profit-sharing trust asked the Harris family descendants if they would consider forming an employee stock ownership plan (ESOP) as a means for employees to buy all or part of the company. The family agreed to consider it, and two independent studies are now being conducted to determine how such a plan could work.

The studies, by Duff & Phelps in Chicago and ESOP Services in Charlottesville, Va., will probably be concluded within a month, said Richard Buzbee, editor and publisher of the Harris-owned Hutchinson News in Kansas and a trustee. Issues such as how the company would be valued fairly while still complying with the will have yet to be resolved, he said.

“We don’t know yet whether it’s going to be feasible,” Buzbee said of a possible employee buyout. If not, it isn’t clear if the company would be free to be sold to outsiders.

The Harris family isn’t speculating publicly on the sale’s chances. Harris Rayl, grandson of Sidney Harris and publisher of Harris’ Salina Journal in Kansas, declined comment. Phone calls to other Harris family members were not returned, and company officials also would not comment on the possibility of an employee buyout.

A company brochure dated June, 1990, said the value of Harris Enterprises “has been estimated at well over $100 million,” and that “dollar volume”--presumably, the company’s term for its overall revenue, although company officials wouldn’t return calls seeking clarification--grew from $7.85 million in 1966 to $45.2 million in 1989. Circulation at its daily newspapers ranges from 5,000 to about 40,000, and totals more than 168,000.

John Morton, a Washington-based newspaper analyst, said Harris’ market value today might be less than it was in 1988 when the company was up for sale. “Values tend to slip during recessions,” he said, although he declined to estimate how far Harris’ value could have declined.

Morton added that a few other newspaper companies have started ESOPs as a means for employees to own the firms. The Peoria Journal-Star, for example, is about 82% owned by an ESOP.

The beginning of Harris Enterprises dates back to Ralph A. Harris’ 1907 purchase of the Ottawa Herald in Kansas. Harris’ two sons, John and Sidney, inherited the paper and expanded the company’s holdings to include several other newspapers.

Sidney Harris died in 1955, and it was his will that contained the clause allowing for an employee buyout at a price based on a multiple of the net income of the company--which in 1955 owned six newspapers. That formula might have worked in the 1950s, but in 1988 it would have valued the company at about $10 million, said Tom Eblen, general manager and news adviser at the Daily Kansan, the University of Kansas student newspaper.

John Harris died in 1969, and now the descendants of Sidney and John Harris own most of Harris Enterprises. The profit-sharing trust and other shareholders also own small portions of the stock of some of the papers.

Harris purchased the Camarillo Daily News in 1965. The 65-year-old paper has a daily circulation of about 10,400 and about 90 full-time employees, including about 20 editorial workers.

A 50% interest in the Simi Valley Enterprise, which also publishes daily, was acquired by Harris in 1963. The other 50% is owned by John P. Scripps Newspapers of San Diego. It has a daily circulation of about 17,600, and a staff of 130, including 21 editorial employees.

Harris acquired the Moorpark News with Scripps in 1985, and in 1989 the paper merged with the Moorpark Mirror to become the Moorpark News-Mirror. It is the only weekly paper in Harris’ fold and has a circulation of 5,000.

Harris has long been known for its tradition of putting editorial independence before profits, and it spends more proportionately on editorial than most other newspapers, analyst Morton said. Buzbee recalled that after he was hired by John Harris in 1957, “about two phone calls was the extent of interference I received.”

But the potential sale of the company “certainly woke everyone up to the fact that these properties are worth more than we thought,” Buzbee said. Since then, more attention has been paid to the company’s profit potential, and ad rates have been increased, he said.

But Buzbee downplayed the changes. “About the only modernization in that area is we have budgets now, and we try to live with those budgets,” he said. “There’s very little interference still.”

Wayne Lee, editor and publisher of the Simi Valley Enterprise, said recent layoffs at the paper are a product of the recession--which has curtailed advertising at newspapers across the nation--and not of a change in management philosophy. Lee said 14 positions have been cut from the paper’s staff this year.

At the Camarillo Daily News, ad lineage is down, and raises and hiring are being more closely scrutinized, but there have been no layoffs, said editor and publisher Julie Doll. The paper debuted a contemporary new design last Thanksgiving and has been beefing up local business coverage.

“I think we’re faring as well or better than most newspapers,” Doll said.

Above, Julie Doll, editor and publisher of the Camarillo Daily News, says her paper has avoided layoffs. “We’re faring as well or better than most,” Doll said.