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Freedom to sell off properties?

Wed, Sep 16, 2009

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Our sister publication, the Arizona Capitol Times, reported yesterday that just prior to declaring bankruptcy, Freedom Communications made a last-ditch effort to sell most, or all, of their Arizona pubs to a group of local investors.

As Matt Bunk reported,

“It’s not clear whether any agreement is under consideration now – there was a deadline to act by Aug. 31 – but an industry source offered some details about how the deal was structured.

First, it would have been a two-phase deal that included the purchase of two commercial buildings, four newspapers, a marketing company and a web-design business. The four newspapers included in the deal are reported to have a total circulation of 100,000. They have about 265 employees.

The deal would have cost the buyers $2 million, with a first-phase payment of $200,000 due by noon on Aug. 31. Because the deal didn’t close at that time, it’s not clear whether any arrangement is still in the works…The industry insider I spoke with said two California businessmen were behind the deal to buy Freedom’s Arizona assets. One was David Ganezer, of the Santa Monica Observer, and the other was Steve Hadland, who runs the Culver City Observer and is CEO of the Santa Monica Media Company …it’s not clear which of the other Freedom papers in Arizona would have been part of the deal. The East Valley Tribune’s sister publications include the Ahwatukee Foothills News, the Daily News-Sun, Freedom Politics, Glendale Today, Peoria Today, Surprise Today and YourWestValley.com.”

What does this mean for the post-bankruptcy future of Freedom Communications and for the Gazette? It may be that Freedom was planning to divest itself of its Arizona properties in any case, and that this failed deal was just done in the normal course of business. Freedom’s Arizona papers have, like most Sun Belt pubs, been hit hard by the recession, so divestiture might make sense, bankruptcy or not.

On the other hand, maybe this signals that a partial breakup of Freedom’s publishing empire is possible, even likely.

When the company emerges from bankruptcy, the new owners will have both a free hand and no attachment to the past. They’ll have three options.

-Keep the company intact, and hope for a “dead cat bounce.” Post recession, print newspaper revenues should recover somewhat, even if the long-term prognosis remains grim. If company-wide cash flows improve, the company might be able to further reduce debt, and perhaps sell selected properties at better prices than can now be realized.

-Shrink the company now, by selling unprofitable properties, reducing corporate staff, and concentrating on the company’s crown jewels-or, if there aren’t any, their ankle bracelet zircons.

-Sell everything! Owning a newspaper is like owning a pay phone company during 1993 – it may still be profitable, but it becomes less valuable every day. Get rid of it – remember the investment adviser who used to lead off his TV show with the words “It’s (insert day of the week) – and it’s a great day to sell your airline stocks!” He gave his viewers the same advice for years – and he was always right.

So maybe the venerable old G may be for sale after all – and maybe, as you read this, a group of cold-eyed investors are thinking about puttin’ up some cold cash to take over the dismal old building on Prospect Street.

Didn’t there used to be a pay phone right by the front door…?

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