We know a lot more now about the deal that handed Donald Sussman, the hedge-fund mogul, progressive philanthropist, and husband of Chellie Pingree, 75 percent of the Portland Press Herald and its siblings.
First, we know HOW THE DEAL CHANGED, in less than two months, from a $3.3-million loan worth five percent of the company into a $3.3-million cash purchase of three-quarters of the equity. Greg Kesich, a columnist for the Press Herald who is the vice-president of the Portland Newspaper Guild and holds one of two union seats on the company's board of directors, says Sussman's proposal for a loan "didn't work for the private-equity investors," who wanted "a lot of guarantees about how they were going to get out." So the company diluted existing shares — including the employees who own part of the company. "We're part of the 25 percent that just shrunk, that used to be 100 percent," Kesich says. How come? Easy: "Everybody's betting that a smaller share of something is better than a big share of nothing."
Second, we know THE BUSINESS PLAN HAS NOT CHANGED. While union president Tom Bell was dismissive of a proposed takeover plan by Chris Harte, a former PPH president and heir to the Harte-Hanks media fortune, because it was "too reliant on print" and didn't include enough investment in new technology. (Also, it would have required crushing concessions from the union.) It's clear the existing model isn't working: circulation and ad revenue have declined for years. Kesich says the company will invest the new cash in a major technology upgrade that union president Tom Bell has described as integrating online and in-print publishing, as well as modern software for advertising sales and accounting. Bell suggests the move will take the company from running way behind in the media industry to being in front of the pack.
Third, UNION-SOUGHT EMPLOYEE RAISES HAVE NOT YET BEEN NEGOTIATED. Wage increases were tabled until this year in the contract approved last year. Kesich says they'll come up in the middle of this year. The rest of the contract is still in force as well, Kesich says, until its original expiration date in June 2013.
Fourth, we can be reasonably sure SUSSMAN ISN'T DOING THIS TO CONTROL A MESSAGE or push a political agenda. (Seriously, as has been noted by others, if he wanted to push a political message, would he buy a newspaper or ads on television?) "He says that he's investing in a community asset and he considers journalism to be a public good, as well as a business," Kesich says. "It benefits everybody whether they read it or not." (So declining circulation shouldn't bother Sussman.) In fact, Kesich suggests, "this is more a philanthropic move" than a business one, though he says Sussman wants the paper to be "self-sustaining."
• That's a lot of good info, but questions remain:
The Bangor Daily News has reported that CRG Partners Group, a Boston-based firm "specializing in restructuring troubled companies," was brought in to reorganize in the wake of Connor's departure, and was looking for $10 million in investments to pay off debt, and an additional $5 million for operating cash. SUSSMAN'S CONTRIBUTION IS TINY compared with those goals. (Not to mention a pending lawsuit over $125,000 in allegedly unpaid bills for paper.) Will $3.3 million be enough to turn a struggling company into a successful one?
