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Wednesday, August 30, 2000

Star-Bulletin closing after 117 years

Canadian publisher will submit bid for Star-Bulletin

It's 'an interesting but sobering
opportunity,' says David Black

Mike McKenna bows out

By Rick Daysog

One of Canada's largest independent newspaper operators has emerged as a suitor for the Honolulu Star-Bulletin.

David Black, owner of Victoria, British Columbia-based Black Press Ltd., said yesterday he will submit a bid for the 118-year-old afternoon daily to newspaper broker Dirks Van Essen & Murray by Friday's court-imposed deadline.

Black, whose company owns about 80 community newspapers in western Canada and Washington state, said the 63,000-circulation Star-Bulletin presents an interesting opportunity given its support in the local community.

"We think the Star-Bulletin has a long and proud history, and we'd like to continue it," said Black, who is not related to Canadian newspaper baron Conrad Black. "People enjoy the newspaper and don't want to lose it."

Phil Murray, broker at Dirks, Van Essen & Murray, declined comment this morning.

Black is one of several parties vying for the Star-Bulletin.

Peter and Jane McClaran, publishers of the monthly Kauai Business Report, and former five-term Hawaii congressman and broadcasting executive Cecil Heftel have expressed an interest. Peter McClaran told the Star-Bulletin yesterday that his and Heftel's groups may combine their bids. A group representing a majority of Star-Bulletin employees plans to submit a proposal by Friday, also.

Another group which includes Windward Oahu car dealer Mike McKenna and former Chicago Sun-Times publisher Robert Page had expressed an interest in the paper but say they will not bid because they have not been given enough financial information.

Black declined to discuss the details of his offer. But he acknowledged that any deal would require a substantial investment since the buyer would have to develop a new infrastructure for the newspaper, including new advertising and circulation departments.

A new owner also would have to compete against media giant Gannett Co., which owns the rival Honolulu Advertiser, for a share of Hawaii's advertising dollars.

"It's an interesting but sobering opportunity," Black said.

Black is no stranger to competition. More than half of his company's 80 properties have direct newspaper competition, and many operate in markets served by large media chains like Hollinger Inc. and Thomson Corp.

Black once founded a community newspaper, the Prince George Free Press, from scratch in 1996 to compete directly with The Prince George Citizen, a 69,600-circulation daily owned by Southam Inc. The Free Press is now a 31,000 semiweekly.

"We know how to scrap," said Black, who once referred to the turf battles between Canada's newspaper operators as "gas wars." "We've more than held our own in these markets."

Born in Vancouver, the 54-year-old Black -- who holds a bachelor's degree in civil engineering and an MBA -- got his start in the newspaper business in 1975 when he purchased the twice-weekly Williams Lake Tribune from his father, Alan Black. From there he snapped up Canadian weeklies at a rapid pace.

In 1997, Black Press paid British-based Trinity International Holdings $58 million to acquire 33 newspapers in West Canada, including the Red Deer Advocate, a 19,000-circulation daily.

George Manning, a former president and shareholder of Black Press's Island Publishing unit, which owns weeklies on Vancouver Island, said that during the mid-1980s and early 1990s, Black Press experienced tremendous sales growth, largely from acquisitions and start-ups. In 1984 the company's revenues were more than $1 million, but by 1993 they had grown to about $27 million, said Manning.

As a result of the Trinity deal, one Canadian magazine estimated Black Press's 1997 revenues at about $95 million.

"I have the highest regard for David Black," said Nick Russell, a former journalism professor at the University of Regina in Saskatchewan. Russell noted that Black's weeklies are well respected in the communities they serve. "He started with one tiny newspaper and has parlayed that into a significant empire."

News that potential buyers were emerging was welcomed by Star-Bulletin staffers.

Stephanie Kendrick, assistant features editor and a member of ESOP Star-Bulletin, which represents most of the paper's 99 newsroom employees, said she was delighted that there will be bidders, considering the complaints from some investors that they were not given enough financial information on the Star-Bulletin. "We're particularly pleased that people are still interested, given the tortuous process that this has been," Kendrick said.

The Star-Bulletin was put up for sale in April by its Florida-based owner, Liberty Newspapers Limited Partnerships, postponing a federal court antitrust lawsuit by the state attorney general's office and a community group known as Save Our Star-Bulletin.

Last September, Liberty announced that it was closing the Star-Bulletin and ending a joint operating agreement with Gannett's Advertiser in exchange for $26.5 million. Under the JOA, the Star-Bulletin and Advertiser shared printing and circulation costs but maintained separate newsrooms. The antitrust lawsuit put Liberty and Gannett's plans on hold.

Federal Magistrate Barry Kurren has set a Sept. 15 deadline to review bids and approve a buyer for the Star-Bulletin.

Bulletin closing archive

Star-Bulletin closing after 117 years

Mike McKenna quits
Star-Bulletin effort

The auto dealer expresses frustration
at being unable to get 'into the
Advertiser's books'

By Peter Wagner

Just days short of the deadline to bid on the Honolulu Star-Bulletin, one potential buyer appears to be bowing out, while two others are considering joining forces.

An investor group headed by Windward auto dealer Mike McKenna yesterday notified New Mexico-based newspaper broker Dirks Van Essen & Murray it will withdraw from the process unless the Friday bid deadline is extended.

"The process to date leaves us little choice," wrote Mark Eissman, a Chicago lawyer and key member of the McKenna group. "The bulk of our time has been spent trying to get additional, needed information and trying to compensate for not receiving same."

The group, which also includes California publisher Robert Page, former publisher and part-owner of the Chicago Sun-Times, wants an extension to Oct. 31. It does not plan to submit a bid on Friday.

"Maybe someone will ask, 'What happened to the credible buyers?'" Eissman said. "I think the answer is clear: They couldn't participate in this process and bring other people in."

Meanwhile, Kauai publisher Peter McClaran and former Hawaii congressman Cecil Heftel are considering a joint bid on the Star-Bulletin, McClaran said yesterday.

"Right now, we're sharing information," McClaran said. "He has a proposal and we have a proposal, and we're working on a joint proposal."

Heftel, whose group once included McKenna, could not be reached for comment. McClaran's group is backed by Kauai businessman Jeff Lindner.

Under terms of the court-supervised sale, bids are due Friday at 4 p.m. Mountain Daylight Time -- noon in Honolulu.

The Star-Bulletin was put up for sale by owner Liberty Newspapers on April 24, putting a pending antitrust lawsuit on hold. The suit, brought by the state attorney general last year, alleged Liberty and joint operating partner Gannett Pacific Corp., owner of The Honolulu Advertiser, conspired to create a monopoly in Honolulu.

Last September, Gannett planned to pay $26.5 million to Liberty, which would close the Star-Bulletin and end the joint operating agreement.

Current terms of the sale include few physical assets and no interest in the JOA. If no buyers emerge -- the current deadline for a court-approved sale is Sept. 15 -- the antitrust case would resume.

Parties that have publicly confirmed their interest in the Star-Bulletin include McKenna, Heftel, McClaran, Star-Bulletin employees and, most recently, Canadian publisher David Black.

The deadline for bids on the Star-Bulletin, earlier set for Aug. 14, was extended three weeks ago by Federal Magistrate Barry Kurren after several parties requested more time to prepare bids.

But the two-week extension did little to appease McKenna's group, struggling to attract financing with what it calls late-coming and inadequate financial information.

"You cannot make a decision without getting into the Advertiser's books, and they're just not going to let us do it," said McKenna yesterday.

Public complaints by McKenna and others about the difficulty of obtaining business records from a closely guarded "data room" set up by Liberty and Gannett prompted the judge to step in and force improved access last month.

Eissman, who faxed his ultimatum to newspaper broker Dirks Van Essen & Murray yesterday, said more time is needed to "verify and shore up" poor information provided by the seller.

"We wanted to get additional information and to get a certified public accountant in there to get the type of numbers we felt we could rely on," said Eissman. "We have a number of people who have expressed interest as investors, but we're just not able to give them the solid information they're used to having."

Eissman noted the group requested the Oct. 31 extension in a letter to Dirks Van Essen on Aug. 7, which brought no reply.

Robert Page, part of McKenna's group, called terms of the Star-Bulletin sale "patently absurd" because the paper is being offered virtually devoid of physical assets. "It's ridiculous."

Anyone who puts in a bid on the newspaper, Page said, "will have the challenge of a lifetime."

Lead broker Phil Murray yesterday would only say a deadline extension is not likely.

Details of Star-Bulletin earnings and operating costs are elusive, Liberty and Gannett contend, because of the commingling of both papers' operations under the joint operating agreement.

McClaran, whose monthly Kauai Business Report is published from his Kalaheo home, said his bid will likely assume "transition assistance" in the form of a subsidy by the sellers.

While no such subsidy has been offered, potential buyers in Honolulu have closely watched the recent sale of the San Francisco Examiner to publisher Ted Fang, who received a $66 million subsidy from seller Hearst Corp. According to court testimony, the subsidy was offered to allay antitrust concerns in Hearst's purchase of the San Francisco Chronicle.

Bulletin closing archive

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