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Tuesday, June 20, 2000

Star-Bulletin closing after 117 years

Kauai publisher
group interested in

The producers of a business
newspaper have filed a letter of interest

By Peter Wagner


A Kauai couple publishing a monthly business newspaper from their Kalaheo home wants in on the Honolulu Star-Bulletin.

Peter and Jane McClaran, co-publishers of the 16,000-circulation Kauai Business Report, recently submitted a letter of interest to newspaper broker Dirks Van Essen & Murray.

"We thought it would be a great benefit to have two editorial voices for the community," Peter McClaran said yesterday.

McClaran said he has the financial backing of Jeff Lindner, a wealthy Kauai developer and member of a Cincinnati family whose business interests include Chiquita Brands International Inc. and the Cincinnati Reds.

Peter McClaran
"We're hoping the court will
see us as a qualified bidder."

McClaran said Lindner is considering investing up to $3 million to bankroll the newspaper in its first months of new ownership.

Lindner yesterday confirmed the arrangement but declined comment.

Dirks Van Essen has been looking for a buyer for the Star-Bulletin since May 5 in a court-supervised sale effort.

But whether the McClarans, whose 16-page publication is barely breaking even, are deemed "serious" contenders remains to be seen.

Philip Murray, lead broker at Dirks Van Essen, has said that only financially qualified candidates will receive the financial data needed to make a bid.

"We're hoping the court will see us as a qualified bidder," McClaran said.

Third party to emerge

The McClarans are the third party to publicly acknowledge their response to yesterday's deadline for letters of interest in the Star-Bulletin. Others are former Hawaii congressman and broadcast executive Cecil Heftel, and ESOP Star-Bulletin, a majority of the newspaper's editorial staff.

Murray has said many others have expressed initial interest in the newspaper, but he will not disclose how many submitted formal expressions of interest by yesterday's deadline, citing confidentiality agreements.

The results of the broker's six-week search for a buyer could be known later this week after a meeting with U.S. Magistrate Judge Barry Kurren.

Star-Bulletin owner Liberty Newspapers L.P. is selling the paper independent of its joint operating agreement with Gannett Co., owner of the Honolulu Advertiser. The JOA allows for separate newsrooms while combining business functions, such as circulation and advertising.

Court presides over process

Liberty and Gannett agreed on April 21 to a 65-day deadline to offer the paper for sale. The agreement, presided over by the federal court, put aside an antitrust lawsuit against the two companies.

The suit, filed in October by the state attorney general, alleges the publishers conspired to close the Star-Bulletin in order to create a monopoly.

Suit could still move forward

The two parties announced in September that Gannett would pay Liberty $26.5 million in return for ending the JOA, due to expire in 2012, and closing the afternoon paper.

If a sale of the Star-Bulletin does not close, the antitrust suit is expected to move toward trial.

McClaran said he believes the paper can break even by keeping expenses down. He estimates operating losses of $1.6 million to $3 million in its first three months of new ownership because of billing delays.

Thereafter, he said, keeping the Star-Bulletin afloat would be a matter of employee teamwork.

"I think flexibility would be important, and a willingness to do a lot of different things to make it work," McClaran said. "If that's possible, we'd be interested in being involved with that."

Beyond Lindner's backing, the McClarans plan to put up their $100,000 life savings, McClaran said. "It's a risk but I think it's worth doing," he said.

He hopes his commitment will attract other investors, including Star-Bulletin employees.

Of the paper, he said, "It's got a great editorial staff, a loyal subscriber base and strong community support."

The challenge, he said, would be to woo advertising clients.

Staff of 'co-publishers'

The McClarans, both 41, have journalism degrees from the University of Hawaii.

They met while working at the Garden Island, Kauai's daily newspaper, in the early 1980s. Peter later served as then-Congressman Daniel Akaka's press secretary while Jane worked at Gannett-owned USA Today.

The couple returned to Kauai where Peter was a spokesman at the Pacific Missile Range Facility at Barking Sands before starting up the Kauai Business Report in 1995.

"I think a good way for the Star-Bulletin to survive would be for its staff to think of everybody there as co-publishers," he said. "Everybody working together to succeed."

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