Beverly Hills buyout firm to acquire San Diego Union-Tribune
Owners of the flagging San Diego Union-Tribune, one of the largest daily newspapers in California, said Wednesday that the publication would be sold to a private equity firm for an undisclosed sum.
Platinum Equity of Beverly Hills would be the Union-Tribune’s first owner since the paper was acquired in 1928 by Copley Press Inc., a family-owned chain based in La Jolla.
The sale would mark the end of the Copley family’s eight-decade involvement in the newspaper business and comes at a time when buyers are scarce in an industry battered by falling circulation, revenue and profits.
Platinum specializes in buying businesses in declining markets and has completed nearly 100 acquisitions in numerous industries since being founded in 1995. The Union-Tribune would be the firm’s first newspaper holding.
“This is a market that is undergoing substantial upheaval and transition, and we intend to try to help the paper redefine, reinvent and reorient itself,” said Mark Barnhill, a principal at Platinum. “That doesn’t just mean scaling downward -- we try to grow our businesses. If other folks are running out of a burning building, we’re running into it.”
The sale is expected to be completed during the second quarter.
Copley put the newspaper on the block in July, when it hired advisors from New York to explore “strategic alternatives.” Print publications nationwide have been pounded by a decline in advertising, a trend that has worsened with the recession. The Union-Tribune’s ad revenue has tumbled 40% since 2006, publisher Gene Bell told the staff in January. That has spurred cost-cutting moves including employee buyouts, layoffs and unpaid furloughs as well as benefit reductions.
A few companies had expressed interest in the Union-Tribune, including Los Angeles Times owner Tribune Co., which filed for bankruptcy protection late last year; MediaNews Group Inc., parent of the San Jose Mercury News; and Los Angeles billionaire Ron Burkle’s Yucaipa Cos. But none of them could reach a deal.
Platinum could be buying the Union-Tribune in hopes of later picking up the beleaguered Orange County Register and the struggling Los Angeles Times to create a Southern California media empire, said industry analyst John Morton.
But a more likely scenario, he said, is that Platinum pounced on the paper because it was cheap, hoping to sell it at a profit when the economy recovers.
The Union-Tribune was also attractive because it wasn’t burdened by a lot of debt.
The Platinum transition team working on the paper will include David H. Black, whose Black Press owns more than 150 newspapers and websites, including the Honolulu Star-Bulletin and the Akron (Ohio) Beacon Journal.
Tom Gores, Platinum’s founder and chief executive, is listed at No. 334 on the Forbes list of world billionaires for 2009, with an estimated net worth of $2 billion. At 44, he is among the youngest on the roster.
In August, Platinum finalized its sale of metal processor PNA Group Holding Corp. to Los Angeles giant Reliance Steel & Aluminum Co. in a deal valued at $1.1 billion. With the $181 million in dividends and fees Platinum collected from PNA since buying it two years earlier, the equity firm raked in more than 25 times the $17.5 million it initially invested.
Barnhill said representatives from Platinum would work with the staff at the Union-Tribune to improve operational discipline and customer service. He said speculation that the current Union-Tribune management team could be replaced was premature.
A newspaper spokesman declined to confirm the number of remaining editorial employees, but sources put it at about 280.
The Union-Tribune is the nation’s 23rd-largest newspaper, with weekday circulation of 269,819, according to the most recent figures from the Audit Bureau of Circulations. That was down 3% from the same period a year earlier.
In 2009 alone, several major newspaper companies have seen their fortunes fade as advertisers and readers fled online. The parent of the Minneapolis Star-Tribune filed for bankruptcy protection, as did Philadelphia Newspapers, and the Tucson Citizen may be shut down if it cannot find a buyer.
Hearst Corp. this week closed the print edition of the Seattle Post-Intelligencer and moved its operations online, and it may also shut down the San Francisco Chronicle unless it can dramatically lower operating costs. Denver’s Rocky Mountain News was shuttered entirely last month.
Newspaper stock prices and valuations have plummeted. But the Union-Tribune acquisition suggests that values on some properties have sunk so low that some entrepreneurs can’t resist taking a shot.
“The fact that one newspaper finally sold doesn’t mean that the dam has broken, but it’s starting to leak,” Morton said. “Buyers could be emboldened.”
Platinum has kept businesses for more than a decade while selling others after brief restructuring phases, Barnhill said. But whenever the firm enters a new market, it often leverages its new experiences into similar purchases.
“We’re interested and will continue to look at other newspaper properties, though we won’t define where or at whom we will look next,” he said. “We don’t model our businesses with an exit horizon in mind. We consider them from an entry standpoint.”
Copley’s biweekly paper the Borrego Sun in Borrego Springs was also sold Wednesday after being on the market since November, said Editor and General Manager Judy Winter Meier. The 2,600-circulation publication was bought by British entertainment magnate Patrick Meehan, a part-time resident of the desert community. The acquisition of the paper is expected to be completed March 31.
The Union-Tribune was Copley’s flagship paper. The product of a 1992 merger between the San Diego Union and the Evening Tribune, both owned by Copley and originally founded in the 1800s, the paper billed itself as the oldest business in San Diego County.
Copley tried to provide a financial cushion for its star product, eventually selling most of its dozens of Illinois and California papers, including the Daily Breeze in Torrance. In May, Copley sold its news service.
In the newsroom Wednesday, staffers learned about the sale through e-mail, though speculation the night before had led to a mass Google search of Platinum. About 120 employees gathered for a 20-minute meeting with Editor Karin Winner, who characterized the sale as “very good for San Diego and good for the Union-Tribune.”
(BEGIN TEXT OF INFOBOX)
At a glance
SAN DIEGO UNION-TRIBUNE
Owner: Copley Press Inc.
History: Formed in 1992 from a merger of the San Diego Union, founded 1868, and the Evening Tribune, founded 1895
Circulation: Monday-Friday, 269,819; Sunday, 342,384
U.S rank: 23rd in weekday circulation
Headquarters: Beverly Hills
Chief executive: Tom Gores
Notable acquisitions: U.S. Robotics (2005), American Racing Equipment (2005), IT Solutions (2004), CompuCom Systems (2004)
Source: Times research