Heat City

Randy Miller

When Colorado businessman Randy Miller traveled to Mesa last week, he acted very much like the man who would soon be in charge of the Pulitzer Prize-winning East Valley Tribune.

He toured its facilities. He introduced himself to the staff. He even handed out job applications across the building, telling employees to reapply for positions under his Thirteenth Street Media company, which hopes to take over the paper early next year.

But Miller’s plans appear to be presumptuous. The reality is that Miller has a long way to go – and possibly competition to fight off – before he can expect to be called “boss” at the newspaper that was slated to be shut down before he offered to buy it last month.

And in fact, there is still a chance Miller won’t buy the East Valley Tribune at all – because in the end, the decision will be up to someone else entirely.

The uncertainty comes from the fact that the Tribune’s current owner, Freedom Communications, filed for bankruptcy earlier this year and is still in the process of digging out from under it.

That means even if the owners want to sell directly to Miller, bankruptcy rules require them to put the newspaper up for a public auction instead. It also means anybody can bid for the paper, with a judge ultimately deciding who’s is best.

“They can’t just hand pick a bidder,” said bankruptcy attorney Todd Burgess with the Phoenix office of Gallagher & Kennedy. “It’s going to be an open and fair bidding process.”

Up for grabs

Neither Burgess nor his firm are representing any of the parties involved in Freedom’s bankruptcy or the Tribune’s sale. He explained in general terms how a newspaper or any other type of company can be sold during bankruptcies.

It’s a complicated process, he said, but it is designed to ensure the sale is fair to everyone involved.

So here’s how the process works: First, Burgess said, Freedom and Miller must file paperwork with the bankruptcy court, telling the judge what kind of deal they hope to make and creating a starting point for the auction.

From there, anybody else interested in buying the paper can jump in, offering more money or a better outcome for the newspaper. If they even hope to compete, their bids must rise above the starting point set by Freedom and Miller.

When all the offers are in, the court weighs each one, looking at whether the bidder has enough cash available to make the purchase and whether the deal will help Freedom repay the debt it owes. “You either need to see cash in a bank account or financing from a lender,” Burgess said.

Finally, the judge picks the winner, and the sale takes place soon after that. The whole thing can happen in less than a month, Burgess said.

For now, though, the Tribune’s sale is in a holding pattern. Neither Freedom nor Miller have told the court anything about the deal they hope to make. The auction process cannot begin until they do so.

Miller did not return multiple calls seeking comment, but Robert Emmers, a spokesman for Freedom, said the proposal will likely be filed with the federal bankruptcy court on Thursday – Christmas Eve.

Another possible buyer

Meantime, at least one other newspaper publisher is upset at the fact that Freedom is already giving Miller so much access to the Tribune and its employees.

“I just think it’s inappropriate,” said Stephen Hadland, the chief executive of the Santa Monica Media Company in California. “He doesn’t own it. He’s not the owner. And yet he’s being given carte blanche to rifle through all the stuff.”

Hadland said he, too, wants to buy the newspaper and has lined up investors to “aggressively” take on Miller in the auction. “I’m a little shocked that he’s already walking around like he owns the place,” Hadland said.

It wouldn’t be the first time the Santa Monica Media CEO has tried to buy the Tribune. Hadland said he nearly had a deal with Freedom back in August before the company made any public announcement that the newspaper was up for sale.

He said he even paid Freedom $2,200 in earnest money to prove he was serious about the deal. But the whole thing fell apart at the last minute, he said, because the company declared bankruptcy on Sept. 1, just days before the rest of his financing came through.

“It was just sad,” Hadland said. “It was just a sad moment for me.”

Freedom’s spokesman declined to comment about the possible August deal. But Hadland provided Heat City with a copy of a claim [PDF] he said he recently filed in the company’s bankruptcy case, asserting he had a deal to buy the Tribune for $2 million.

Though Hadland declined to discuss what he intends to bid now, that $2 million is significantly more than what he offered to pay for another Arizona newspaper earlier this year.

Hadland’s company was a bidder to save the Tucson Citizen newspaper, which at the time was Arizona’s oldest publication. But the bid of $400,000 was rejected by the Virginia-based media giant, Gannett Co., which chose to shut down the publication instead.

Now, Hadland said he hopes the judge will ultimately choose his bid for the Tribune over Miller’s. “We hope that we’re the successful bidder,” he said.

And while Freedom’s Emmers said the company is “proceeding to finalize a deal” with Thirteenth Street Media, he also acknowledged that other bidders such as Hadland will have the chance to challenge that choice in front a judge.

“Sure, the final OK has to come from the court,” Emmers said. But he added the judge will fully look at the legitimacy of each bid and determine whether financing is already in place. Competing bidders, Emmers said, will have to “put up or shut up.”

All the while, the Tribune remains in flux, though Emmers said the current owners intend to keep it open during the bidding process.

That, at least, is good news for the employees there. As recently as last month, the Irvine, Calif.-based media chain said it intended to close the newspaper by Dec. 31 if no one bought it.

[Disclosure: I am a former staff reporter at the East Valley Tribune.]