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Wednesday, September 13, 2000

Star-Bulletin closing after 117 years

Bulletin bid
deadline moved
back to Sept. 29

Parties competing for the paper
get more time to fine-
tune their offers

By Rick Daysog

The prospective buyers of the Honolulu Star-Bulletin will get an additional two weeks to work out details of their offers for the 118-year-old afternoon daily, a federal judge has ruled.

Federal Magistrate Barry Kurren yesterday extended his deadline to review and approve the planned sale of the 63,000-circulation Star-Bulletin to Sept. 29 from Sept. 15.

The decision places the three known bidders in direct competition to negotiate the fine points of the proposed deal with the Star-Bulletin's owner, Liberty Newspapers Limited Partnership, and Gannett Co., which owns the rival Honolulu Advertiser.

It also gives the potential buyers -- Black Press Ltd. of Canada, Los Angeles-based Hadland Communications Inc. and a local group that includes former Congressman Cecil Heftel, Kauai businessman Jeff Lindner and Kauai publishers Peter and Jane McClaran -- additional time to clarify ambiguities and correct deficiencies in their bids.

"We're moving everyone forward but we're also telling people (where) they may have a problem right now," said Phil Murray, the broker handling the sale.

Murray confirmed that one of the bidders, the McClaran-Heftel group, was deficient because it had asked Gannett for an $18 million subsidy, which is prohibited under the original court-approved sales procedure.

The McClaran-Heftel group and Hadland bids also failed to include marked-up contract forms for Gannett-owned assets such as computers and news racks, according to people familiar with the deal. The bids also didn't include marked-up forms for a printing agreement with Gannett.

Bids by Black and Hadland do not seek subsidies from Gannett.

Such deficiencies are typical in complex transactions that involve competing bids from diverse players and people familiar with the sale believe they can be ironed out in the negotiating process.

David Black, whose Black Press owns more than 80 weekly newspapers in Canada and Washington state, declined comment. Steve Hadland, whose Coastal Community Newspapers unit operates five weeklies in Los Angeles, also declined to respond.

The Star-Bulletin and Advertiser operate under a joint operating agreement in which the two papers share printing, distribution and advertising costs but are editorially independent.

Last September, Liberty announced that it was closing the Star-Bulletin and would terminate the JOA in exchange for a $26.5 million payment from Gannett. Liberty was forced to put the paper up for sale in April to postpone antitrust lawsuits filed by the state attorney general's office and a local community group, Save Our Star-Bulletin.

Under the proposed sale, the JOA would terminate and the Star-Bulletin would compete head-on with the 104,000-circulation Advertiser editorially and on the business end.

The sales process has been anything but smooth.

Yesterday, McClaran and Heftel criticized the process for not including a subsidy, saying the Star-Bulletin could not survive without one.

While the newspaper remains "very viable," Heftel said the lack of a subsidy shows that there is a "continuing determination to close the Star-Bulletin." He now believes that the way to preserve the afternoon daily is to allow the lawsuits by the state and SOS to go to trial.

"Very simply put, there is no rational way that a proposed operator and owner of the Star-Bulletin ... is going to survive in the long run if they had to simply start from zero," Heftel said.

"The idea that you can go forward without a meaningful subsidy or joint operating agreement is not meaningful."

Lawyers for Liberty, Gannett, SOS and the attorney general's office declined comment. But Murray defended the sale process, saying the terms of the court-approved deal clearly state that no subsidy was to be offered.

Murray added that the court "bent over backward" to accommodate the McClaran-Heftel group's bid and is working hard to get the various parties to negotiate a deal.

"I don't understand what there is to complain about," Murray said. "We're offering an opportunity to hammer out a deal."

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