JimmyCsays: At the juncture of journalism and daily life in KC

We all know what a mess the McClatchy Co. has wedged itself into, with its ill-advised, 2006 purchase of the Knight Ridder newspaper chain, which included our beloved Kansas City Star.

Saddled with $1 billion in debt after that purchase — now down to a little more than $900 million — McClatchy has been trying to scrape and cut its way to financial stability since about 2008. (That’s when the layoffs started at The Star.)

As hard as it is to imagine that another newspaper chain could be more screwed up than McClatchy, there is one: Tribune Publishing.

Tribune’s flagship is the Chicago Tribune. Its fleet of papers also includes the Los Angeles Times, the Baltimore Sun, the Hartford Courant, the Orlando Sentinel, the Sun-Sentinel of Fort Lauderdale and the San Diego Union-Tribune. Big papers all, but this chain has been a basket case since April 2007, when a real estate tycoon named Sam Zell bought what was then the Tribune Co. for $8.2 billion. Having no idea what he was doing or how to run a newspaper business, he promptly ran it into the ground. Twenty months after the purchase, the company filed for bankruptcy, listing assets of $7.6 billion and an incredible debt of $13 billion.

Now, salvation — or at least stability — just might be at hand. On Monday, Gannett Co., the nation’s largest newspaper chain, announced that a couple of weeks ago it had submitted to Tribune an offer to buy the company for $815 million, including about $350 million in debt. The offer is for $12.25 per share, a more than 60 percent premium over Friday’s close of about $7.50. (The stock is trading at about $11.50 today.)

Gannett has more than 100 newspapers, including The Indianapolis Star, The Courier-Journal in Louisville, The Cincinnati Enquirer, The Tennessean in Nashville, The Des Moines Register and the Detroit Free Press.

The offer of $815 million, with a per-share profit of about $5, sounds pretty good to me. (It makes me wish I owned some Tribune stock, except that I’ve been narrowly focused on New York Times stock because NYT is the strongest newspaper company around and is making a winning transition from print to digital.) 

And yet, in spite of what looks like an appealing offer, Tribune Publishing hasn’t responded to Tribune’s bid. Having been met with silence, Gannett on Monday made its offer public, in effect taking the offer directly to shareholders.

The reason Tribune’s board of directors hasn’t responded to Gannett is that Tribune is going through another top management transition, where yet another non-newspaper tycoon is trying to establish himself, as a recent Chicago Tribune story put it, as “a 21st-century media baron” whose goal is to “save the journalism industry.”

Michael Ferro

Standing in the way, at least temporarily, of Gannett’s proposed purchase is 49-year-old Michael Ferro, a Chicagoan who made his money in the tech industry and early this year invested $44 million in Tribune, making him the largest single shareholder. Ferro already has one strike against him on the journalistic front, having failed in his bid to turn the Chicago Sun-Times, Chicago’s No. 2 paper, into a national media powerhouse. After making his big plunge in Tribune stock, he donated his roughly 40 percent stake in the Sun-Times to a charitable trust to avoid conflicts of interest with Tribune.

Ferro is currently Tribune’s “non-executive chairman,” and a story in today’s New York Times says that after a June 2 Tribune shareholders’ meeting, Ferro should control five of eight votes on the board of directors. The story goes on to say:

If Mr. Ferro….can get past June 2 without a deal, he will probably have the leeway to fully direct the process. He could choose to negotiate or perhaps he could stonewall. He could even try to take the company private himself. Who knows?

Putting an exclamation point on the clouded situation, The Times quoted a media analyst as saying, “Recent management upheaval creates numerous risks with respect to strategy and execution going forward.”

It seems to me the best thing that could happen in the coming weeks is a shareholder revolt that triggers a June 2 vote authorizing sale of the company to Gannett.

I never thought I’d be advocating a newspaper sale to Gannett, which turns its papers into the equivalent of sausage factories, but it probably would be the most favorable outcome for the papers, their employees and even Ferro, who stands to make a lot of money on a sale to Gannett.

But Ferro seems to have stars in his eyes, and if ego wins out over practicality and economics, Tribune Publishing might be in for another wild ride.

“I want to finish what I started,” Ferro told the Chicago Tribune in March.”Instead of playing golf and doing stuff, this is my project — journalism. We all want to do something great in life. Just because you made money, is that what your kids are going to remember you for? Journalism is important to save right now.”

I sure agree with that last statement, but I’d hate to see those Tribune papers end up in worse shape than they already are.