Why a Boston Globe sale is improbable (but not impossible)

Stop me if you've heard this one before: A group of civic-minded local businessmen hope to buy a shrinking metro paper, manage it with fresh eyes and restore it to its glory days.

The scenario is playing out again this week in Boston, where young entrepreneur Aaron Kushner is trying to put together a group to buy The Boston Globe from The New York Times Co. People close to Kushner (though not Kushner himself) have said he will submit a bid of more than $200 million.

Put me down as a skeptic, and here's why:

The Times isn't motivated to sell.

The Globe was for sale in late 2009. The Times Co. hired investment bankers, put together a deal book, and negotiated with bidder groups. Though there appeared to be two serious bidders, the Times decided not to sell. The offers, reported to be in the range of $35 million to $45 million, were not good enough.

Since then, the Globe's business has stabilized if not soared. Prolonged labor negotiations in 2009 brought down the cost of union contracts. Meanwhile, The New York Times Co.'s debt and liquidity issues have eased. CEO Janet Robinson told the Globe's staff earlier this month that the paper is not for sale. It looks to me like a keeper for the company — unless someone comes forward with cash and is prepared to way overpay.

Two words: "Zell" and "Tierney."

I have come to believe that in certain big cities, there are likely to be one or several rich citizens intrigued by the idea of taking over and saving the newspaper. But for all the rumblings, it has happened just twice, and neither was a happy experience.

Chicago real-estate czar Sam Zell's ill-starred creative-financing takeover of Tribune Co. for $8.2 billion in 2007 is still playing out in bankruptcy court. A closer parallel to Kushner's effort may be Brian Tierney and local partners buying The Philadelphia Inquirer and Daily News from McClatchy for $550 million in 2006.

That was a success in that Tierney got past the talking stage and did the deal. But it was a disaster for Tierney, fellow investors and their bankers, who were forced into bankruptcy and sold last year at a quarter of the price to a group of vulture private equity groups.

Good luck with financing.

In both the Zell and Tierney takeovers, banks chipped in for a big share of the purchase price. That was then, though, and this is now. Lenders and public-market investors are shunning the industry. If Kushner and his group do put together a $200 million bid, most likely all or nearly all will be their cash.

For each deal that goes forward, a number don't.

This is round three for the Globe. Jack Connors, a retired advertising agency founder who yesterday confirmed his interest in investing with Kushner, was a principal in one of the 2009 bidding groups that ultimately dropped out. He also joined in former GE CEO Jack Welch's 2006 exploration of a bid for the Globe.

In Los Angeles, billionaires David Geffen and Eli Broad showed interest in buying the LA Times but never got a serious audience with Zell and company. A local bid to buy The Baltimore Sun from Tribune stalled as well.

In San Francisco, financier Warren Hellman led a group that in 2009 looked to acquire the San Francisco Chronicle. On closer inspection, they lost enthusiasm for buying into the Chronicle's high labor costs and other fixed expenses — and instead launched the nonprofit Bay Citizen.

Kushner does not fit the typical profile of a newspaper rescuer.

He is 37, a relative newcomer to the Boston area. He previously ran and sold a first-generation dot-com that allowed people who moved to change addresses online. In the 2000s he ran a moderately successful greeting card company.

Kushner is not a nostalgist for the simpler, better days of newspapering, having described himself in a Boston Magazine profile as a "contrarian." But he won't be able to assemble a credible bid on his own; he'll need a lot of other people's money and publishing expertise.

There's no magical approach to running a newspaper profitably.

Some of Kushner's advisors and potential co-investors have said he has great ideas: "a way of of doing things that is radically different. ... It will transform the business," as one put it.

However, Kushner has consistently declined in interviews to say just what these bold new ideas are (or to say how much money he's committed to bid).

The notion that there is a secret sauce out there that can set metros back on a strong growth path rings false to me. As my former St. Petersburg Times boss and mentor Andy Barnes used to say, treat with extreme prejudice any publishing schemes from those new to the business that begin, "Well, you could just..."

All this adds up to a situation in which you have a seller who's not particularly motivated and a buyer who may find interest from his potential investors melting away if they start negotiating and assess the risk with a clear eye.

But never say never. Boston has the mixed psyche of big-time, yet provincial that could be just right for a serious push for local ownership. And as CEO Robinson said in declaring that the Globe is not currently for sale, she and her board would have a fiduciary duty to consider a serious offer if one is forthcoming.


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