The Very Big Business Of Newspaper Trading

Michael Hedges April 14, 2021 Follow on Twitter

The perilous decline in recent years of operating profits for news publishers has been widely chronicled, often with overarching sadness. Fallen newspapers are mourned with obituaries like those they once published. The sorrow has deepened immeasurably as the news model rapidly replacing the local publisher is both online and highly suspect, possibly related. Supporters of journalism and, even, news publishing are likened to museum curators. But hope springs eternal.

Tribune Publishing is once again in the midst of ownership change. The US publisher of the Chicago Tribune and many others has been through several owners during the last two decades. Prior to that, during the media fat years, the company made several notable acquisitions including, through the Tribune Media subsidiary, a full compliment of US radio and television outlets. The Chicago radio and television stations were named WGN for World’s Greatest Newspaper. Such was the brand strength of the Chicago Tribune.

After the acquisitions and resulting cash-flow came debt. The Tribune companies were sold to an investor who paid with more debt, a US$8.2 billion leveraged buyout. The bankruptcy proceedings three years later showed US$13 billion in debt. Creditors regrouped, the broadcasting assets sold, Tribune Publishing shrank, even losing its landmark Chicago lakefront headquarters.

Hedge fund Alden Global Capital acquired a 32% stake in late 2019 principally from ex-Tribune Publishing executive Michael Ferro. Alden Global already wholly owned several US news publishers, including the Denver Post, and gained a reputation as "one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism,” said the Washington Post (March 15, 2018). In February Alden Global offered US$635 million to take over Tribune Publishing. Board members quickly approved as most are aligned with Alden Global.

By the first week in April things changed. Hotel owner Stewart Bainum and Swiss billionaire Hansjörg Wyss submitted a US$680 million offer. Mr. Bainum, whose Choice Hotels International is headquartered in Baltimore, had sought to acquire the Baltimore Sun but the deal died on terms dictated by Alden Global for additional fees. A decade ago Herr Wyss, unknown to most Americans, sold his medical device company Synthes for US$21 billion from Johnson & Johnson, today known to all Americans for something else. The Bainum/Wyss bid is cash. The Alden Global bid is stock and more debt. The Tribune Publishing board, channeling the star of Never Cry Wolf, said of the new bid “good idea.”

For now only US media watchers are chiming in, investment watchers glued to Coinbase or today mourning Bernie Madoff. Rather dismissively the Wall Street Journal, principally controlled by the Murdoch family, groused (April 10) that Herr Wyss intends to turn Tribune Publishing into a non-profit, anathema to free-marketers. Bloomberg (April 5) referred to Bainum and Wyss as “white knights.” VanityFair (April 5) referred to Alden Global as “blood suckers.”

NeimanLab Joshua Benton (April 5) observed that Alden Global has a choice, raise their bid or cash out at a huge profit. “The hedge fund’s model is pretty straightforward: buy papers; cut costs to the bone, and then another 10 percent or so; underinvest in digital; milk the cashflow from declining print; ride the plane into the ground.”

“If Bainum and Wyss are successful, Alden’s shares will have increased in value 45 percent in less than a year and a half,” he continued. “That’s not a bad return in the newspaper business these days.”

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