April 7, 2021

Breakingviews: Newspaper bidding war puts ESG on the front page

by Breakingviews.

A bidding war for the front pages is pitting public good versus the bottom line. A group of beneficent billionaires led by hotel magnate Stewart Bainum swooped in with a $680 million proposal for U.S. newspaper chain Tribune Publishing, topping an earlier offer from a hedge fund. The white knights have an altruistic motive: to help local news. But in the end, price will determine the winner.

Bainum, the chairman of Choice Hotels International, and Swiss businessman Hansjoerg Wyss are teaming up to buy the publisher of the Baltimore Sun, Chicago Tribune, Orlando Sentinel and New York Daily News for $18.50 per share. They agreed to stump up the necessary equity capital required to muscle their way into the process because Tribune already had a buyer. It agreed in February to sell itself to Alden Global Capital for $17.25 per share, which could also come back with a higher offer.

Alden, which owns 32% of Tribune, is no stranger to the newsroom. The operator of more than 90 publications such as the Mercury News in San Jose, California, has a reputation in the business for gobbling up newspapers and slashing expenses. The Denver Post was so troubled by the deep cuts initiated by its parent it published an editorial describing Alden as “vultures” and pleading for the fund to sell to an owner that wanted to invest in journalism.

Tribune may have no debt, but a more than 20% decline in annual revenue and widening losses suggests Alden will continue its quest for cost savings. Bainum’s group, on the other hand, wants to find a cadre of deep-pocketed individuals in the mold of Amazon.com boss Jeff Bezos, owner of the Washington Post, that would be willing to buy Tribune’s city papers and reinvest profits back into the business.

There’s a case for socially minded investors to get into the news business. In the past 15 years, some 2,100 newspapers disappeared, according to the UNC Hussman School of Journalism and Media. That has left large swaths of the country without local news, increasing the reliance on dubious sources that may amplify misinformation to fill the void. Alden may yet match the Bainum group’s price. Or it could walk away with more than $230 million from its share of the deal plus a break fee – and put ESG on the front page.

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BREAKINGVIEWS

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

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