Blood Ties Drive A Deal
Times Co. acquires three Maine papers
linked to its founder.
By John Morton
John Morton (email@example.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.
Most newspaper acquisitions today are driven by cold financial calculations. It's an exercise in which sentiment and other human qualities rarely intrude.
That was not the case, though, in the recent sale of three Guy Gannett dailies in Maine to the Seattle Times Co. Circumstances leading up to the sale, some of them almost accidental, help explain why one newspaper company headquartered in the Pacific Northwest would want to buy another about as far from home as it's possible to get.
The story begins in 1700, when three Blethen brothers, whose family had immigrated to Massachusetts from Wales 50 years earlier, moved to Maine and established a lasting family presence. A descendant of those brothers was Alden Blethen, born in 1845 in Waldo County, orphaned at 6, and indentured as a servant until he was 15. In classic American fashion, he rose from poverty to become a school teacher in Farmington and, ultimately, a lawyer in Portland. It happens that these three signal locations of his life in Maine are served by the three Guy Gannett dailies: the Portland Press Herald, the Kennebec Journal in Augusta and the Central Maine Morning Sentinel in Waterville.
Alden Blethen left Maine for the west, stopping first in Kansas City and then Minneapolis, where he was a principal owner of the old Minneapolis Star. Eventually, he moved to Seattle, where he founded the Seattle Times in 1896. The Washington state Blethens multiplied and prospered, and today the company is run by Alden's descendants, headed by great-grandson Frank A. Blethen.
Move up to the mid-1990s and the Seattle Times' preparations for a book marking its centennial. The Seattle Blethens knew that Alden Blethen had come from Maine and that Blethens still were there, but otherwise were ignorant of the founder's background. To fill in the gaps, the company hired two historians.
What they found so fascinated Frank Blethen that he determined to do what no other Seattle Blethen had done: visit the Maine origins of his great-grandfather and reconnect in a personal way the family's distanced branches. That first visit led to more, with other family members joining in what came to be known as "pilgrimages." These culminated in a reception and dinner at which the western Blethens met more than 30 of their Maine kin.
During one trip, Frank Blethen's son Ryan opined that it would be wonderful if the Seattle Times could acquire a newspaper in the state that had captured the Washington family's imagination. Frank agreed but, being aware of the firmly local family ownerships of Maine's seven daily newspapers, figured this was impossible. Then, unexpectedly, the Guy Gannett newspapers were put up for sale earlier this year.
The three papers attracted considerable interest. They offered an instant cluster of newspapers commanding 41 percent of the state's total daily circulation and 71 percent of its Sunday circulation (or 54 percent, if one counts as a Sunday the Bangor Daily News' Saturday weekend edition). Among those contemplating bids, according to my information, were Cox Enterprises, Gannett, Journal Register Co. and Media- News Group.
But there were problems. The Guy Gannett family insisted the deal be structured like a stock sale rather than an asset sale. This meant the buyer would inherit the papers' numerous and restrictive labor contracts and would not be able, as often happens in asset sales, to tell union members, "OK, tomorrow we take over. You can all reapply for your jobs and start negotiating new contracts."
That limited the amount bidders were willing to offer. It did not deter the Seattle Times Co. The firm has, from a management viewpoint, what might be termed "the full catastrophe" in the number and aggressiveness of craft unions it must deal with. So, the Guy Gannett contracts were not daunting.
Still, the Seattle Times' management had to persuade its directors, especially outside ones, that the investment made business sense.
As Frank Blethen said in an interview, his firm could afford to take a long view. He said some companies, including publicly owned companies answerable to institutional investors, feel the need "to extract a pound of flesh right away." The Times Co., he added, is willing to accept earnings temporarily reduced by the acquisition's costs in interest and principal payments.
The Seattle Times Co. wound up paying a high price--at just over $200 million, about a 30 percent premium above what most attractive newspaper companies go for these days, I calculate (neither buyer nor seller has revealed details). However the deal turns out for Seattle, it's comforting to know that--in this era of buying, selling and swapping newspapers--sometimes imperatives beyond the strictly financial can make a difference.###