Sun-Times owners would shut paper if Justice blocks Tronc deal – Marketing/media News

on Jul8

7 July 2017 | 5:00 pm

The owners of the Chicago Sun-Times are prepared to shut down the paper if a deal with an investor group falls through and the government tries to block its sale to the parent of the Chicago Tribune.

Wrapports, which owns the Sun-Times, plans to pursue the previously announced deal with Tronc if an investor group led by former Ald. Edwin Eisendrath can’t finalize its offer by early next week. “If they’re not going to be ready on Monday, we’re moving on,” said Brad Bulkley, an investment banker handling negotiations for Wrapports.

If the Justice Department’s antitrust division goes to court to try to halt a merger with Tronc, Wrapports owners are prepared to shut down the Sun-Times, said sources familiar with the talks.

Still, would-be buyers in the Eisendrath group are feeling confident about their bid. The group includes the Chicago Federation of Labor and some of its union members, including the Chicago News Guild which represents some Sun-Times workers.

The Eisendrath investors seem to be offering a counterpoint to the Tribune’s historical conservative editorial page. Other notable Chicagoans in the group, at least at some point, included criminal defense lawyer Len Goodman as well as trader and former Democratic U.S. Senate candidate Blair Hull, the sources said. Goodman, Hull and Eisendrath, also a Democrat, didn’t return calls seeking comment.

One previously undisclosed member of that group, restructuring consultant Bill Brandt, said he thinks the money pledged for the purchase will be in place by the deadline and that the deal will go forward. While he declined to say exactly how much he’s investing as part of the proposal, he said it’s as much as $2 million. “This is a great opportunity for the Sun-Times, and Chicago is a big enough city to have two papers,” he said.

Wrapports put the Sun-Times on the block earlier this year, pitching it to peers like the Daily Herald and Gannett before concluding that the only taker was Tronc, parent to the larger Tribune. The two Chicago publishers reached a tentative agreement in May that would merge the companies but keep the two newsrooms separate.

Wrapports was created by a group of investors led by venture capitalist Michael Ferro in 2011 to buy the Sun-Times, but he shifted gears last year and tapped some of the same investors to buy then-Tribune Publishing, now renamed Tronc. Ferro is chairman of Tronc, while one of his co-investors, Madison Dearborn Partners Chairman John Canning, is chairman of Wrapports.

The Justice Department’s antitrust division called for a casting a broader net for potential purchasers. The Eisendrath bid surfaced in that search, while other possible acquirers, including real estate magnate Neil Bluhm, dropped away during a review of the assets.

The regulators seem determined to squelch a Tronc purchase, according to people involved in the discussions essentially being led by the antitrust division. Wrapports would sell the paper, and its sister weekly Chicago Reader, to the Eisendrath group if they have more than $11 million in hand and other details in place, according to the people familiar with the talks.

Even though they’ve proposed to pay only $1 for the assets, they’ll need the money to fund the operations, which are currently losing about $4.5 million annually, according to sources.

Other newspaper companies that were approached weren’t interested in bidding in large part because of the $25 million-a-year Wrapports pays to Tronc to print and distribute the Sun-Times, the sources said. With that contract running into 2019, companies other than Tronc would have their ownership tied to that previously negotiated expense.

Brandt said he has no illusions about getting rich off the investment in the Sun-Times. Indeed, his Chicago firm, Development Specialists, is in the business of providing counsel to companies looking to avoid bankruptcy and to those in bankruptcy. Rather, he sees the undertaking as a “civic duty” with its own “psychic rewards,” and he’s not a fan of the Tribune. “Chicago needs a second paper,” he said, besmirching the bigger-circulation broadsheet Tribune as fit only to line a bird cage.

Brandt fancies a scrappy, gossipy paper with hard-hitting political coverage, more like the New York Post (and, incidentally, Ferro initially had that in mind for the Sun-Times, too). “Without a free press, America is doomed,” Brandt said. “In the current environment, the free press has never been more important.”

If Brandt’s group of investors prevails, the company is likely to tap his restructuring skills to keep the paper running.



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