March 12, 2010

Papers' suitor, unions meet as deal nears

By TUX TURKEL Staff Writer

— By TUX TURKEL

Staff Writer

The lead partner in the investor group trying to buy Blethen Maine Newspapers from The Seattle Times Co. has stepped up his meetings with unions that represent employees, an apparent sign that the prime focus has shifted from securing financing to obtaining labor agreements that will support the deal.

Although no parties will discuss finances or a proposed closing date, union officials say there's pressure now to come to terms as quickly as possible.

Richard Connor met Thursday in Portland with local leadership of The Portland Newspaper Guild, which has members at the Portland Press Herald/Maine Sunday Telegram and the Morning Sentinel in Waterville. He was scheduled to meet Friday with leaders of the Communications Workers of America local that represents 85 employees at the Kennebec Journal.

Other meetings with the union locals are tentatively set for the near future.

These meetings are significant because financing to buy Blethen's Maine media holdings is understood by union officials to hinge in part on members' approval of concessions aimed at lowering operating costs. These concessions would include a two-year wage freeze, a longer work week and the surrender of a week's paid vacation, guild officials have said.

In exchange, organized workers would get a 15 percent equity stake in the new company, as well as three seats on the board of directors, under an Employee Stock Ownership Plan, according to the guild. Members need to approve the contract changes by a majority vote.

If the changes are approved and the deal goes through, the Maine media properties would be run under the first employee stock ownership arrangement to involve union-represented newspapers in the country, said Christopher Mackin, president of Ownership Associates, a Cambridge, Mass., consulting firm that sets up employee ownership plans.

Mackin is working with The Portland Newspaper Guild on the Connor purchase.

''These discussions are pivotal,'' said Tom Bell, a Press Herald reporter and the guild's president.

Complicating the talks, Bell said, is the fact that the overall economy has deteriorated since guild leadership agreed to initial concessions last fall. As advertising revenue has declined, Connor has asked for further changes in the contract, Bell said.

He declined to say whether those requests include wage cuts, but said the union has put new options on the table. Bell also wouldn't discuss possible layoffs, saying the unions have no control over them.

Reached Friday, Connor declined to characterize the meetings except to say that he was providing an update to union leaders. He said he's continuing to work on all aspects of the sale, and did confirm that more meetings are pending.

''It's only an acknowledgment that we're very close to a deal,'' he said.

Connor also met briefly Friday with Robert Bickler, president and chief executive officer of Blethen Maine Newspapers. Bickler said it was a routine request from Connor to gather more information related to the purchase. He wouldn't comment on the sale.

Connor currently is editor and publisher of the Times Leader newspaper in Wilkes-Barre, Pa., and has been trying to buy Maine's largest media company since last summer. He initially pursued the purchase through a partnership he led called Maine Media Investment LLC. It included William S. Cohen, a Republican former U.S. senator and secretary of defense, and business associates Michael Liberty and Robert Baldacci.

The men currently act as key advisers, Connor has said. Baldacci, brother of Gov. John Baldacci, has said he's still considering investing in the deal.

Liberty said Friday that he'd have nothing to say until the deal is complete. Cohen could not be reached for comment.

More recently, HM Capital, a private equity firm in Dallas that was behind Connor's Wilkes-Barre purchase, emerged as the lead investor.

Blethen Maine Newspapers said earlier this week it had signed a letter of intent with an undisclosed buyer -- believed to be HM Capital -- for the purchase. Blethen also sent labor unions a 30-day notification of a sale, as required by contracts.

Besides the Press Herald/Telegram, Blethen's holdings in Maine include the Kennebec Journal in Augusta and the Morning Sentinel. The company's Maine Today division produces several Web sites and print publications, including The Coastal Journal in Bath and The Maine Switch.

The nation's business climate continues to worsen, and the pullback in advertising has been especially hard for the newspaper industry. Publishers are looking for more ways to cut costs, and some are giving up.

In Seattle, the parent company of the Seattle Post-Intelligencer, the Hearst Corp., announced Jan. 9 that it would quit printing the paper within 60 days and consider an Internet-only operation if no buyer is found.

At The Seattle Times, which has a joint operating agreement with the Post-Intelligencer, union workers met last week to discuss a management request to cut compensation and benefits by 12 percent next month. The Times is trying to cut expenses by millions of dollars.

Earlier this week, newspaper publishers in Washington state asked lawmakers to give them a temporary break on the state's main business tax. Seattle Times Publisher Frank Blethen told legislators that his paper was ''literally holding on by our fingertips today.''

But media experts also say it's inaccurate to conclude that all newspapers are in bad shape.

''Quite a number of newspapers still make a handsome profit. It's just not as high as it used to be,'' said Alan Mutter, a former San Francisco newspaper editor who publishes an industry blog, Reflections of a Newsosaur.

Mutter wrote a story recently showing that even though industry sales fell an average of 15 percent in the first nine months of 2008, they were down only 2 percent for papers with circulations of less than 100,000.

Local advertisers continue to value local news and audiences, he said, especially in smaller markets with less direct competition.

''In a reasonably healthy economy,'' he said, ''if you buy a paper at the right price and operate it wisely, you can be profitable.''

That philosophy led to the sale of seven daily papers and 50 free and paid weekly papers in 15 separate deals around the country last year for Cribb Greene & Associates, a newspaper brokerage firm.

All the sales were in midsize and small markets, said John Cribb, a managing director. Several of these sales were financed through local and regional banks, which Cribb said have stronger ties to their markets and aren't suffering from the financial troubles typical of larger banks.

''No one else can step into the local news franchise,'' he said. ''People want local news more than ever. The product small papers provide is actively sought.''

Connor has said he's negotiating with Maine banks for part of the financing needed to close the deal.

The relationship that Connor has forged with the newspaper unions will have value to lenders, said Mackin, the consultant working with the Portland guild on the employee stock ownership plan.

''It gives them a reasonable expectation of labor peace,'' Mackin said. ''Plus, there's the potential for a partnership between the workers and the company to grow the business. That should be worth a lot.''

That potential will get a test when workers finally vote on proposed contract changes. Union officials say they don't know when that will be, but Scott Shepherd, president of the CWA local representing workers at the Kennebec Journal, said he knows time is short.

''We're anxiously waiting to hear more information, so we can process it and make our decisions,'' he said.

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.comWhile no parties will discuss finances or a proposed closing date, union officials say there's pressure to come to terms as quickly as possible.

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