Union-Tribune sale prompts questions

After nine months of searching, the Copley family finally found a taker for The San Diego Union-Tribune. It was announced on Wednesday, that Platinum Equity partners, a Beverly Hills-based equity firm, has signed off on an acquisition deal. Terms of the deal were not disclosed.

So with the ominous state of the newspaper industry, the question that is on the tip of everyone’s tongue is: Is this a good thing or a bad thing for a company that has already cut its newsroom staff by more than 100 since 2007?

Union-Tribune editor Karin Winner called the sale “terrific news,” but one would expect no less. And Platinum Equity is obviously thrilled with its latest acquisition, but for what reasons?

“This is a business that is facing tremendous operational pressure in an industry that is going through dramatic transition and a lot of upheaval in different market sectors,” said Mark Barnhill, principal with Platinum Equity. “Frankly, one of the things that appealed to us is the Union-Tribune is a vital community institution down there. It has a long history of being not just a business but a pillar of that community, and I think there is appeal to us in investing in that brand and helping build a stronger and better U-T for the future.”

Still, why would a private equity company, with no prior history of owning a major news publication, suddenly pounce to acquire a daily metro that has had a 40 percent reduction in ad revenue since 2006? Not to mention one that happens to be sitting on a prime piece of real estate, that Voice of San Diego reported being worth $100 million.

Forgive people for being cynical.

“My sentiment right now is, I’m not sure we know any more right now about the future of the U-T than we did before the announcement [of the sale],” said Dean Nelson, head of the journalism department at Point Loma Nazarene University. “I think selling to an equity firm raises as many questions as it answers. What we don’t know is does this mean they are just going to sell it for parts? Are they going to try to spin off what is sellable and shut down what is not?”

Union-Tribune staff members obviously hope that’s not the case.

“There was a question asked [during our meetings] - are they buying us for real estate or for the business,” said a long-time staffer. “Gene Bell [the newspaper's CEO and president] said he believes they’re buying the business, not for the assets.”

Even if the new ownership group is sincere in wanting to continue to operate the newspaper, one has to think that in this industry, the newspaper, as it currently exists, will have to go through some sort of restructuring to be profitable.

Barnhill, understandably, was holding specifics pretty close to the vest as to what that anticipated restructuring might look like. If he was playing a game of Business Bingo, his board would have exploded.

“We identify companies that need operational support, that may be navigating difficult markets and need strong operations partners that can help the business navigate that difficult market transition,” he said. “And that’s what we think is going on here. We will bring an operations focus to the business that will help ensure they develop a comprehensive go-forward plan that makes it a viable concern going forward.”

How’s that for vague?

If history is any indicator, the news could be bleak for the newsroom. Canadian newspaper publisher David Black, who owns dozens of publications, is part of the Platinum team for this transaction. In recent years has purchased the Akron Beacon Journal and the Honolulu Star-Bulletin, and made staff reductions to both of those publications, with the cuts in Akron coming just months after Black’s acquisition.

One thing that we can be sure of is that it’s unlikely any major changes will take place before the completion of the transaction, which is expected to take place anywhere from six weeks from now or sometime into the third quarter.

“There are a lot of unknowns,” said the staffer. “We don’t know who’s exactly going to be in charge. We don’t know who’s here that’s going to stay. We don’t know if any of these people are actually going to be here or if it’s going to be a revenue producer for them.”

Barnhill said that after meeting with the paper’s management team, the new owners will sit down and decide what decisions need to be made. He also said that sometimes those decisions do involve making cuts.

“Well yeah, but if you’re trying to get me to intimate that there is some sort of plan in motion to make cuts [at the paper], that’s not the case,” he said. “We will look at scalability of the business in a variety of different ways, but it doesn’t necessarily mean cutting to reduce costs. It could mean growing the business or investing in the business in areas where there is an opportunity. It really means focusing on what’s the product set that delivers the greatest value for customers.”

Despite that assertion, it’s fair to say that there are a large number in the newsroom who acknowledge that the light at the end of the tunnel could be an oncoming train.

“I think it’s a tragedy that San Diego is losing a local owner of the newspaper,” said the long-time staffer. “It’s been locally-owned from the beginning, since 1868. People don’t realize what it’s going to be like to have an absentee owner here until they show their stripes and prove whether they’re going to be active in the community or not. I suppose it’s good that the U-T is one of the few that has actually been bought by someone with apparently the capacity to do something with it. But the proof is in the pudding. We’ll have to wait and see what they do.”

Eric Yates is SDNN deputy managing editor.

Tags: SDNN

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