Colorado publisher Randy Miller appears poised to take over the East Valley Tribune and its sister papers as early as Wednesday after his main competition to buy the Mesa newspaper dropped out of the contest on Friday.
For the past several months, Stephen Hadland, the chief executive of the Santa Monica Media Company, said he planned to try to outbid Miller for the Pulitzer Prize-winning newspaper.
But Hadland told Heat City on Friday he had been unable to convince his investors to pony up enough cash to jump into a bidding war with a Miller’s Thirteenth Street Media.
“All I can say is I’m very, very disappointed,” said Hadland, who repeatedly called the sale of the Tribune and its sister newspapers “the deal of a lifetime.”
Barring any last-minute surprises, Hadland’s withdraw means that Miller has a clear path to take over the Tribune, as well as the Ahwatukee Foothills News in Phoenix and the Daily News-Sun in Sun City.
The three newspapers are being sold by media giant Freedom Communications, which is trying to earn some quick cash to help it get out from under nearly $1 billion in debt.
That same debt forced Freedom into federal bankruptcy protection last year, and because of that, the sale must be approved by a judge before it can go through.
That approval could come at a hearing scheduled for Tuesday in U.S. Bankruptcy Court in Delaware to discuss the deal. If approved, the sale could be completed as soon as Wednesday.
The bankruptcy, however, also means that Freedom had to open the bidding process to the public and consider any serious offers for the three Phoenix-area newspapers.
In documents filed last month, Freedom told the federal judge overseeing its case that Miller, with his offer of a little more than $2 million, had been the only serious bidder to come forward.
Hadland disputed that, though, saying publicly on several occasions he believed his California-based company had the wherewithal to offer even more but that Freedom was no longer taking him seriously.
In fact, Hadland said he had been in negotiations with Freedom to buy the three newspapers in August, months before they were even officially put on the market. But, he said, those negotiations broke down after he was unable to come up with the cash in time to close the deal.
Freedom confirms earlier deal
Freedom declined for months to comment on Hadland’s claims of an earlier deal. But on Friday, the company broke its silence in a series of documents [PDF] filed in the bankruptcy case.
The documents confirmed that Freedom had agreed to sell the newspapers to Hadland’s Santa Monica Media Company for about $2 million. But, the company said, the deal fell apart when Hadland failed to pay them a $200,000 deposit.
The account matched Hadland’s version of things, but Freedom was using it to tell the judge why the California company should not be taken seriously if it indeed made a play for the newspapers.
But by the time Freedom filed the documents on Friday, the point was already moot.
Hadland said he talked with his investors for the past three weeks and realized on Friday that he could not come up with the cash to challenge Miller’s bid.
Once again, he said his biggest struggle was finding somebody to write a check for the 10 percent down payment that Freedom wanted.
“That’s been my stumbling block,” Hadland said. “Nobody wanted to put up a check for that much.”
It has become a lot harder in recent years to convince lenders to invest in newspapers, he said. “The climate has changed so drastically, getting anything financed is really tough.”
Try, try again
Hadland, whose company operates a small chain of weekly newspapers in California, has long had aspirations of owning a bigger newspaper.
He tried to buy the Tucson Citizen, Arizona’s longest-running newspaper, last year for about $400,000. But the paper’s parent company, Gannett, decided to shut it down instead of selling it at such a low price. The Citizen now operates as a community blogging website.
Hadland also offered to buy the Honolulu Star-Bulletin in Hawaii in 2000 for an undisclosed price. He ultimately lost out to another bidder.
Having failed at least his third major newspaper takeover in 11 years, Hadland said he isn’t giving up his search for the next “deal of a lifetime.”
“I’ll be looking for my next media purchase,” he said. “There’s a lot of newspaper companies in trouble.”
What’s to come
Meantime, this will be a defining week for the East Valley Tribune and its sister papers.
If Randy Miller’s bid is approved on Tuesday, the Tribune will likely undergo almost immediate cutbacks.
Miller, who has not returned multiple phone calls seeking for comment on the deal, has said in prepared statements that he will keep a “significant” number of employees, implying that a number of other employees will be cut.
The current owners, though, have said that the newspaper is losing money at a staggering rate. In court documents, Freedom Communications said the Tribune loses about $60,000 a week, which adds up to a little more than $3 million a year.
That means to simply break even, the new owner will have to cut enough employees or other costs from the budget to make up for the gap.
At that rate, dozens of employees could be eliminated under the new regime unless it can afford to operate with significant losses.
[Full disclosure: I am a former staff reporter for the East Valley Tribune.]