Magazine article Editor & Publisher

Will Hollinger Get Right Kind of Break-Up Calls?

Magazine article Editor & Publisher

Will Hollinger Get Right Kind of Break-Up Calls?

Article excerpt

Offers for company's 'Sun-Times' and eclectic Chicago cluster could be blowing in the wind

As the shock waves from the Hollinger International Inc. scandal reverberated last week from its executive suites through trading floors of Wall Street and Toronto's Bay Street and in the offices of U.S. and Canadian financial regulators, employees at the company's only American cluster took a typically Chicago attitude: What's in it for me?

The easy answer is: a new employer. Hollinger retained Lazard LLC to look at selling the newspapers as a group or individually. At first blush one of the most attractive, and yet problematic, of its candidates for the auction block is the Chicago cluster. It is anchored by the 481,798-circulation Chicago Sun-Times and includes an eclectic mix of dailies and weeklies.

Inside Hollinger, the Chicago cluster's financial performance was second only to its United Kingdom group, generating an operating profit last year of $36.1 million on revenues of $441.8. Yet, some perennial shoppers such as Dean Singleton's MediaNews Group Inc. quickly disclaimed any interest in bidding. Another natural, Tribune Co., publisher of the market-leading Chicago Tribune located across the street from the Sun-Times, was also said to be unwilling to make an offer on its rival while media ownership regulations remain unsettled.

Newspaper brokers last week said the biggest obstacle to a sale of the Chicago cluster is Hollinger's natural interest in selling it in its entirety. "There's probably not a market for the weeklies unless a person also buys the Sun-Times," said Michael D. Lindsey, president of Cheyenne, Wyo.-based Media Consultants Inc. "I would think they would sell it as a package. With clustering, that's what you would want to do."

But the Sun-Times is a second-place newspaper whose competition is the flagship of a media and entertainment giant that in recent years has demonstrated an ability to adapt quickly to pursue new markets. "This looks like a tough deal to me," said one broker, who demanded anonymity. "Tribune can't buy it, and then you've got to find someone who wants to take on Tribune. They're not as rough as Gannett, but they're plenty tough competitors."

Tribune is not the only formidable competitor in the crowded Chicago market. The Paddock family's Daily Herald has become Illinois' third- largest paper serving the prosperous northwestern suburbs, which is also the stomping grounds of The Northwest Herald and other Shaw family newspapers. Both publishers increasingly target the markets of the former Copley dailies and weeklies that Hollinger now owns.

In that environment, detaching individual properties -- such as the Sun and Pioneer Press weeklies that serve affluent suburbs and city neighborhoods -- is almost impossible. "And, of course, (Hollinger's) worst nightmare is that they'll be left with something after a sale," one broker said. …

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