PROVIDENCE, R.I. (WPRI) – The Providence Journal has been sold to GateHouse Media parent company New Media Investment Group Inc. for approximately $46 million, Journal owner A.H. Belo announced late Tuesday afternoon.
New Media “will acquire substantially all of the assets which comprise the newspaper operations of The Providence Journal … including the [Kinsley Avenue] production facility and related land, for $46 million in cash before usual closing costs,” Dallas-based A.H. Belo said in a statement. A.H. Belo said it will keep responsibility for The Journal’s defined-benefit pension plan.
A.H. Belo, which has owned The Journal since 1997, had put the paper up for sale in December. In addition to GateHouse – which emerged from bankruptcy last year and owns dozens of papers in Massachusetts and other states – New Media’s other divisions are Local Media Group Inc. and Propel Marketing.
A.H. Belo said New Media is not buying The Journal’s headquarters at 75 Fountain St. in Providence, its downtown parking lots, or its former Rhode Island Monthly/Sunday inserting building. “A.H. Belo will continue to own and market these properties for sale,” the company said. New Media “is expected to lease the headquarters building and parking lots for one year after the close of the transaction.”
- Update: New Projo owner likely to cut jobs, analysts say
- In-Depth: Q&A: Jon Chesto on new Projo owner GateHouse
- Nesi’s Notes: Full coverage of The Providence Journal sale
The transaction is expected to close during the third quarter, which ends Sept. 30, the two companies said. The Journal’s longtime publisher, Howard Sutton, and its executive editor, Karen Bordeleau, did not respond to a request for comment Tuesday. He became publisher in 1999 and she became the top editor last year.
Sutton sent a letter to employees Tuesday informing them that “more information on further employment with New Media … will come soon,” according to the paper. He also told them: “As we transition with our new owners, other changes will likely be made,” though apparently he did not elaborate.
Doctor: Good deal for A.H. Belo
“I think Belo got the deal it was looking for,” Ken Doctor, a media analyst at the research firm Outsell and the author of “Newsonomics,” told WPRI.com. He said The Journal sold for a multiple of earnings at the high end compared with recent transactions elsewhere.
The Journal will become the crown jewel of New Media’s rapidly growing portfolio in Southern New England, which also includes daily papers such as the Fall River Herald News, New Bedford Standard-Times and the Cape Cod Times, as well as weeklies such as the Norton Mirror, the Swansea News and The Lakeville Call.
In a statement, New Media President and CEO Michael Reed said he was “very excited” to announce the Journal purchase, lauding the paper as “one of the most established and prominent newspapers in the United States.”
“We are very excited to welcome the paper, its employees and the community into the growing New Media family,” he said. “We deeply admire the great work that has been done in Providence under the stewardship of A.H. Belo, and look forward to continuing that tradition.”
New Media is managed by an affiliate of the New York-based investment firm Fortress Investment Group LLC, according to its website. The company said Tuesday it has made deals to acquire roughly $151 million worth of media assets over the last 10 months, including publications in Virginia, Texas, Oklahoma, Kansas and California.
Would-be local buyers strike out
The announcement of A.H. Belo’s deal with New Media will kill speculation – and, in some quarters, hopes – that the newspaper could be purchased by a civic-minded group of local investors. The only such unsuccessful group whose attempt became public was led by Barry Fain, John Howell, Matthew Hayes and Arnold “Buff” Chace Jr.
“It’s a shame that the Providence business community couldn’t put together a deal to return the Journal to local ownership,” Dan Kennedy, an associate professor at the Northeastern University School of Journalism and a longtime media watcher, told WPRI.com in an email.
“Based on their track record, the new owners can be expected to make cuts, which will diminish the paper’s ability to cover the community and the state,” Kennedy said. “But other papers the company owns, including the Cape Cod Times and the Standard-Times, continue to serve their readers well, and I expect that will be the case with the Journal, too.”
Doctor said he expects New Media will cut staff at The Journal after reviewing its operations, but won’t necessarily do so in the newsroom. “I believe there would be layoffs in the back office, in financial and H.R., and then there would be a technical systems review to see if there are efficiencies they can bring,” he said.
“I don’t have much of an idea of what they’re going to do on the editorial side,” he said. “They’re going to have to do an evaluation of how well the community is being covered by the editorial staff they have. But I don’t think they should feel any immediate pressure, because the profits are there.”
Plunging ad revenue partly offset
The Journal’s total revenue ticked up to $21.2 million during the first quarter of this year, a nearly 3% increase compared with 2013, A.H. Belo disclosed in an April regulatory filing. While the paper’s ad revenue dropped 70% from 2005 to 2013, it has offset some of those losses by raising prices and printing other publications.
The Journal’s print circulation on Sundays fell 12% to 96,656 during the six months that ended March 31, while average weekday print circulation fell 9% to 72,023, the Alliance for Audited Media reported in May.
Ongoing aggressive cost-cutting, including a new round of layoffs and voluntary buyouts last fall, have kept The Journal profitable despite the drop in revenue, according to A.H. Belo. The number of employees at The Journal has dropped from 709 in mid-2008 to 377 as of Dec. 31, according to figures reported by the paper and disclosed to potential buyers.
“What Belo succeeded in doing was essentially circling the wagons,” Doctor said.
“The story they could tell the buyer was, ‘We have stabilized this with good management. You can make money, you can have a dependable profit stream,'” he said. “And I would think that the further story is, ‘And this is in a bad economy. Providence will recover someday.’ So you’ve got a good property that is still relatively strong in its market given the nature of the market.”
John Hill, president of the Providence Newspaper Guild union, did not respond to a request for comment Tuesday. His union is one of three that represent Journal employees. Its membership totaled roughly 160 as of late last year.
Propel Marketing could grow in R.I.
Former A.H. Belo CEO Robert Decherd has blamed the paper’s revenue woes in part on Rhode Island’s economy, telling investors last year: “They have a very punishing tax structure, and way more municipalities than a geography of that size could possibly support, so they need to deal with the fundamental reforms and structure of government, which is not an easy process.”
In a statement Tuesday, A.H. Belo CEO Jim Moroney said the company is “confident that New Media will continue the great journalistic tradition of The Providence Journal.” He added: “We thank our colleagues in Providence for their hard work and support as we have been privileged to own and operate The Providence Journal for the past 17 years.”
Doctor also said he expects New Media’s Propel Marketing division, which helps small- and medium-sized companies with online marketing, will try to make inroads with Rhode Island firms. “This is one of the leading marketing services companies in the newspaper services industry, and some people think it’s the best,” he said.
Stephens Inc., an Arkansas investment bank, handled the sale of The Journal for A.H. Belo, which also sold its other non-Texas newspaper, The Press-Enterprise of California, last November to refocus on its flagship Dallas Morning News.
Boston Globe, other papers also sold
The Journal isn’t the only major daily in New England to change hands over the past year.
Boston Red Sox owner John Henry paid $70 million to buy The Boston Globe last August, and the following month Rupert Murdoch’s News Corp. sold the New Bedford Standard-Times, the Cape Cod Times and their sister papers to New Media. Henry is now selling the Worcester Telegram & Gazette, which he acquired as part of the Globe purchase, to Halifax Media of Florida.
Belo Corp. paid $1.5 billion in 1997 for the then-independent Providence Journal Co. and its nine television stations. In 2008, Belo split its TV and newspaper divisions into separate companies, with the new A.H. Belo taking The Journal and its sister papers, the Morning News and Press-Enterprise.
Prior to the Belo takeover, the old Journal Co.’s broadcast division brought in 58% of its revenue. While it’s hard to say exactly how much of the $1.5 billion price tag represented the value of the newspaper itself, one-third of the total would put it at $500 million.