Frustrated BulletinBy Peter Wagner
courts help in
Prospective buyers of the Honolulu Star-Bulletin say they hope a judge's order will free information they have been unable to get from the seller's closely watched "data room."
"This appears to be a step in the right direction," said Mark Eissman, a Chicago attorney and partner with Windward auto dealer Mike McKenna in a venture to buy the Star-Bulletin.
"The information that in other deals you can get readily has been extremely difficult to get here."
Under an order issued yesterday by federal Magistrate Barry Kurren, requests for company documents will be considered by the court if they are withheld by the seller.
Eissman wrote a letter on July 11 to newspaper broker Dirks Van Essen & Murray raising concerns over a data room set up by Star-Bulletin owner Liberty Newspapers and business partner Gannett Pacific Corp. The data room, in a downtown law office, allows prospective buyers to view some business records but not to copy or remove them.
"The fact that some financial information had to be entered into a laptop computer is very difficult," Eissman said. "It's not only time-consuming but potential investors want to see original documents."
Eissman questions why the information would be made available for transcription by hand and not by a photocopying machine.
McKenna, who is outraged by the arrangement, said he has never closed a deal without full access to a company's books.
"I've bought over 17 agencies in my lifetime and in every case I've been able to see the books," he said. "That's just not the case with this company."
Meanwhile, other information in the due diligence process that began June 27 has been flatly denied, said Eissman. He cited details of Star-Bulletin advertising contracts and the newspaper's revenues and expenses as examples of the missing information.
Information about advertising clients is particularly critical, Eissman said, because a new owner would be faced with building new contracts. And the only financial data made available are extrapolations from the joint operations of both the Star-Bulletin and the Honolulu Advertiser under an agreement run by the Hawaii Newspaper Agency.
Mike Fisch, president of the newspaper agency and publisher of the Gannett-owned Honolulu Advertiser, said today that "some information has been provided and some hasn't, depending on legal issues."
He noted, however, that buyers have access to a wealth of information about the property for sale. "We have provided a great deal of historical, financial and operational information and are considering requests for expanded information," he said. "The interested parties currently have the full financials, including line-by-line operational data and historical financial data."
But Eissman and McKenna are not alone with their criticisms.
Similar letters of concern about the data room were sent to the broker at about the same time as Eissman's by New York investment banking firm Keilin & Co., representing Star-Bulletin employees in their bid for a buyout.
Josh Wolf-Powers, an associate at Keilin, said the judge's intervention may do little to help a cumbersome sales process as the Aug. 4 deadline to complete diligence draws near.
"For people who are conducting due diligence, a process that's burdensome translates into discouragement," he said.
Under Kurren's order, requests for photocopied information must first go to the broker. If refused, written requests would then be accepted by the court.
Phil Murray, lead broker in the sale at Dirks, was traveling and could not be reached for comment.
Diane Hastert, an attorney representing Liberty, yesterday said the owner is trying to cooperate.
"We're simply trying to facilitate this process in whatever way we can," she said.
Other attorneys in the sale effort, which put aside an anti-trust lawsuit against Liberty and Gannett by the state attorney general's office and a group called Save Our Star-Bulletin, declined comment, citing confidentiality constraints.
Dirks Van Essen, a New Mexico firm, has been seeking a buyer on behalf of Liberty since May 5. Liberty, on April 24, agreed to a court-supervised sale with a 65-day deadline to close a deal. That deadline yesterday was extended by Kurren to Aug. 18, four days after final bids are due.
Florida-based Liberty Newspapers announced plans last September to close the Star-Bulletin and end a 20-year joint operating agreement with Gannett, owner of the Honolulu Advertiser. The JOA, which allows the Star-Bulletin and the Advertiser to share business expenses while maintaining separate newsrooms, was due to expire in 2012. The deal, announced jointly with Gannett, was to involve a payment of $26.5 million by Gannett to Liberty with no intention to offer the Star-Bulletin for sale. An anti-trust suit brought by the state of Hawaii against Liberty and Gannett in October was put on hold in April when parties agreed to put the newspaper up for sale during a 65-day period.
Bulletin closing archive