Philadelphia Inquirer, April 25

Group of Canadians may make bid for PNI

By Joseph N. DiStefano
Inquirer Staff Writer

Canadian newspaper investors have joined a diverse group of U.S. investors that may bid for The Inquirer and Philadelphia Daily News.

Representatives of Onex Corp., a publicly traded Toronto investment firm, and Black Press Ltd., a newspaper chain concentrated in British Columbia, are among at least four rival groups scheduled to visit the Philadelphia papers this week as they prepare final bids for the papers, according to people familiar with the sale.

Onex chairman Gerald Schwartz, a founder of what is now the CanWest Global Communications media group, and Black Press owner David Black did not return calls seeking comment. CanWest owns the National Post, Montreal Gazette, Vancouver Sun, and other big Canadian dailies.

Black, who is no relation to former Canadian and British press baron Conrad Black, and Onex had combined for a look at the Boston Herald last winter, but decided to take a pass, the Boston Globe reported last month.

In both Philadelphia and Boston, Onex had expressed interest in expense cuts as a condition for investing, according to people familiar with the company's inquiries. Onex and TorStar Corp., which owns the Toronto Star and other eastern Canada papers, are among Black's financial backers.

Outside of British Columbia and neighboring markets in Canada and Washington State, Black's biggest paper is Hawaii's Honolulu Star-Bulletin. Editor Frank Bridgewater said Black had added a Sunday edition and expanded business and entertainment coverage since taking over the island's second-largest paper five years ago.

Black also recruited five local businessmen as minority owners and put them on the paper's board; they seldom inquire about news coverage, Bridgewater said.

The Star-Bulletin loses money, and unionized staffers agreed to pay cuts in 2001, but a companion weekly paper, stuffed with supermarket ads, is profitable, Bridgewater said. Black "lets the people here run the operation," the editor added.

Visitors to the Philadelphia papers' Broad Street offices on April 24 included a rival group of investors led by Avista Capital Holdings L.P., a private-equity firm in New York. Five Avista representatives were accompanied by two bankers from the New York office of RBS Greenwich Capital, an affiliate of Royal Bank of Scotland, which also operates Citizens Bank of Pennsylvania. Christopher M. Harte, a former Knight Ridder Inc. executive, is part of the group but did not join the visitors.

The Philadelphia papers and 10 other Knight Ridder dailies are being sold at the behest of the McClatchy Co., which plans to retain 20 daily Knight Ridder papers after purchasing the chain this summer.

Representatives of at least two other groups -- Yucaipa Cos., of Los Angeles, whose offer is backed by the Newspaper Guild labor union; and a Philadelphia investors' group headed by Brian P. Tierney and Bruce E. Toll -- have been reviewing financial data for the Philadelphia papers.

There may be other bidders as well, according to people familiar with the process. McClatchy officials have declined to discuss the sale, noting only that winning bidders will be announced as sales agreements for each paper are completed.

MediaNews Group, of Denver, also had expressed interest, but executives of the newspaper chain, headed by W. Dean Singleton, balked at McClatchy's price last month, according to people familiar with the discussions.

The Newspaper Guild plans to pressure Knight Ridder to sign new union contracts at papers in San Jose, Calif., Philadelphia and other cities before they are sold, president Linda Foley said last week. The Guild's Philadelphia chapter plans to pay for an ad in the Daily News supporting Yucaipa's bid.

Teamsters at the Philadelphia papers are open to either Yucaipa or the Tierney-Toll group, said John Laigaie, president of Teamsters Local 628, which represents Inquirer and Daily News drivers, because both have pledged to keep the Daily News open. Other bidders have not made that promise.

People familiar with the Yucaipa bid say the company would want to buy the Philadelphia papers, and would look for other deals around the country, even if it is not successful in its efforts to buy the other 10 papers McClatchy wants to sell.

Among his other business efforts, Tierney is a partner in New York real estate developer Donald Trump's bid to build a casino in Philadelphia.

People familiar with the sale say they expect it could be at least two weeks until McClatchy announces the likely new owners of the Philadelphia papers.

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