PHILADELPHIA (AP) — A group of powerful local business leaders announced Monday that it had bought Philadelphia's two largest newspapers from hedge funds for approximately $55 million, a fraction of what investors paid for them in 2006.
It is the fifth time in six years the newspapers were sold.
The buyers, who include influential New Jersey Democrat George Norcross III, former New Jersey Nets owner Lewis Katz and cable TV mogul H.F. "Gerry" Lenfest, said they plan to keep the newspapers' tradition of strong journalism alive in the digital age.
The group also emphatically pledged not to meddle with content, though some of the new owners frequently make headlines. The Inquirer published a huge article last month on how Norcross uses his "political muscle" to run a local hospital.
"Nobody is going to interfere with the news," Katz said at the announcement Monday. "They would be crazy to do that."
The investors had an exclusive option to bid for Philadelphia Media Network, which also operates the Philly.com website and a weekly sports publication. Norcross said he and Katz put the sale in motion by making an unsolicited offer for the papers last fall.
The purchase price is less than 15 percent of the $515 million paid by a group of investors in 2006, and far less than the $139 million creditors paid at a 2010 bankruptcy auction. The industry has been savaged for years by rising costs and declining advertising revenue as readers increasingly consume news online.
The sale comes after Philadelphia Media Network cut 45 positions last month, including 40 in the newsroom. That leaves about 320 journalists at the two newspapers and website — one-third of the editorial staffing level during the 1980s.
Company officials have cited both finances and the consolidation of newsroom functions. Some stories and photos now appear in both the broadsheet Inquirer and tabloid Daily News, which ostensibly compete.
The new owners disputed recent reports that 35 more layoffs were planned, as outlined in a sale-related document obtained by the Daily News. On Monday, Norcross referred to the document as "a draft" and said buyers were unable to dispel erroneous stories because of confidentiality agreements.
He also labeled as inaccurate reports that the struggling company earned $4 million last year. "This newspaper hasn't made money for years," Norcross said.
Katz said overall revenue had dropped from about $500 million six years ago to half that, while costs have not dropped nearly that much. But he stressed the buyers' intent is to grow the media properties, not continue cutting.
A Monday morning stroll through the Daily News newsroom "sickened my stomach," Katz said. "Empty, empty, empty, empty desks."
He also said the new owners would retain publisher Greg Osberg despite criticism by newsroom employees for allegedly interfering with stories about the impending sale.
The buyers established a new company, Interstate General Media LLC, to operate Philadelphia Media Network. Norcross and Katz are the managing partners, while Lenfest serves as chairman.
The group's other partners are William Hankowsky, chairman and CEO of Liberty Property Trust and chairman of the Greater Philadelphia Chamber of Commerce; Kris Singh, president and CEO of technology company Holtec International; and Joseph Buckelew, chairman of the insurance firm Conner Strong and Buckelew, for which Norcross serves as executive chairman.
No partner owns a majority share. In addition to the purchase price, the group pledged up to $10 million in extra funding for newspaper operations.
Hankowsky described it as "patient local ownership" that plans to be around for a long time.
"It's a business deal, but there's a tremendous amount of civic motivation here," he said.
The transaction does not include the newspapers' headquarters just north of City Hall. The hedge funds sold the flagship building in July for $22.6 million to local developer Bart Blatstein, who also expressed interest in buying the newspapers but was shut out of the bidding.
The company previously announced it is moving operations this summer to rented space in a former department store downtown.
Daily News columnist Dan Gross, president of the local newspaper guild, said he was happy to hear the new owners would be kicking in operational funds, and that there is no financing involved in the purchase.
Inquirer columnist Monica Yant Kinney, who said she's written about two dozen columns critical of Norcross over the years, noted the investors' vehement pledge not to interfere with journalists.
Still, she said, "I've never heard of an entrepreneur who would buy something to get beat up."
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