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Monday, April 24, 2000

Star-Bulletin closing after 117 years

Citizens group:
Judge gives paper
better chance

It's a 'hard sell,' says media broker

By Rick Daysog


The Federal court's role in supervising the proposed sale of the Honolulu Star-Bulletin may not guarantee that a buyer will emerge for the afternoon daily, but it will ensure the best chances for a deal, according to a community group that sued to block the closure of the Star-Bulletin.

Richard Port, spokesman for Save Our Star-Bulletin, said the court's involvement will likely make it easier to strike a deal if a viable bidder emerges.

"The main thing is that there is sufficient protection in the agreement that we believe provides reasonable assurance that there will be two viable newspapers for some time to come," said Port.

On Saturday, Liberty Newspapers announced that it had agreed to place the Star-Bulletin up for sale for a 65-day period. The SOS group and the attorney general's office filed an antitrust lawsuit last year to block Liberty's efforts to close the newspaper.

The sale will include the Star-Bulletin's subscriber and advertiser lists but will not include a subsidy, printing presses or a share of the joint operating agreement that guarantees the Star-Bulletin a set profit each year.

The prospective buyer will also have the option to purchase news racks and contract with the Hawaii Newspaper Agency to print the daily.

As part of the deal, the parties agreed for the sale to be supervised by federal Magistrate Barry Kurren, who will review bids from qualified buyers and will also screen brokers hired by Liberty Newspapers.

Specifically, Kurren will screen prospective buyers for financial resources to operate a general circulation newspaper on Oahu for their ability to hire management and operational staff and their ability to exercise independent judgment in terms of the editorial and business functions of the newspaper.

In the case of two or more bidders, Kurren must accept the highest bid.

"I would expect that the court would see that Liberty does not turn down a reasonable offer," said Stephen Barnett, University of California-Berkeley law professor and an expert in newspaper antitrust law.

Mike Fisch, president of the Hawaii Newspaper Agency and publisher of the Honolulu Advertiser, said the sales process speaks for itself, and declined comment on the court's role.

Alan Marx, Liberty's attorney, declined comment.

The two dailies have been operating under a joint operating agreement in which printing, advertising and circulation functions are shared but editorial functions are kept separate.

The owners of the newspapers last September agreed to end the JOA and shut down the Star-Bulletin in an agreement in which Liberty would be paid $26.5 million. The agreement prompted the antitrust suits by the state and SOS.

Newspaper industry experts expect that the Star-Bulletin will not generate much interest due to its limited assets, its declining circulation and its competitive position in a market dominated by the Gannett Co.-owned Honolulu Advertiser.

The Star-Bulletin's daily circulation is about 65,000, while the Advertiser's circulation is about 110,000.

Barnett believes news executives would shy away from the Star-Bulletin deal because it does not include a share of the JOA or a significant subsidy. Barnett cited the cases of afternoon newspapers in St. Louis and Anchorage which folded during the 1980s after their JOAs lapsed.

"It's always a hard sell to sell a second paper that would have to compete with a stronger rival," added Tom Bolitho, president of Bolitho Media Service, an Ada, Okla.-based media brokerage firm.

Gregg Knowles, president of Montclair, Calif.-based Knowles Media Brokerage Services, agrees that a sale of the Star-Bulletin in its current proposed form would be a tough sell. But he likened the afternoon daily's situation to Hearst Corp.'s plan to buy the San Francisco Chronicle and sell the San Francisco Examiner.

After initial efforts to sell the Examiner faced troubles, Hearst was forced to sweeten its offer by providing a $66 million subsidy to the prospective buyer, San Francisco-based ExIn LLC.

"If you have an interested buyer, anything is possible," Knowles said.

Fisch, meanwhile, said the structure of the sales process allows for some negotiations about the terms of the deal. He did not elaborate.

Port and others associated with the SOS group say they are aware of a local group that is interested in the Star-Bulletin. But they declined to identify the group.

Port said SOS signed off on the terms of the sale agreement as a compromise to see if a viable offer will be submitted. If an offer is not submitted, SOS and the state can continue to pursue their suit, which initially was set to go to trial in September.

The state also said it had little to lose from the planned sale of the Star-Bulletin. Attorney General Earl Anzai said he was concerned about the impact on the daily business operations of the Star-Bulletin should the legal dispute persist.

"The Bulletin as an entity is more attractive today than it would be a year from now," Anzai said.

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