AUGUSTA — A group that hopes to buy Maine’s largest daily newspaper and two sister dailies asked a state agency Thursday to invest in the deal.
Richard Connor, who is pursuing the purchase of the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal in Augusta and the Morning Sentinel in Waterville, along with other assets of the Blethen Maine Newspapers Inc., told the Maine Public Employees Retirement System Board of Trustees that “newspapers are not dead” and that by purchasing the Maine publications, “we can make a lot of money.”
Connor, a longtime newspaperman and president of Wilkes-Barre Publishing Co. in Pennsylvania, has pursued the Blethens’ Maine holdings since they were offered for sale in March 2008. HM Capital Partners, an investment firm in Dallas, Texas, joined the effort two months ago. Peter Brodsky, a partner with HM Capital, joined Connor Thursday to lobby the retirement system’s trustees to invest in the deal.
The retirement system manages an investment fund currently worth about $7.6 billion, which supports retirement plans for about 75,000 past and current educators and state employees. The trustees recently allocated 5 percent of the fund for private equity but have not yet done a deal, said Chairman Peter Leslie.
Connor and Brodsky presented a fervent sales pitch.
“All of the news that you’ve heard about newspapers being dead, being a bad business, we have proven they are not dead,” said Connor, citing financial success at the newspapers he runs in Pennsylvania. “We’ll restore these newspapers to financial health. They’ll be great community citizens and we will provide wonderful return for your profit. There are 1,300 or 1,400 daily newspapers in the country and about 100 of them are doing poorly. They’re the ones you’re reading about all the time.”
Brodsky said the deal is attractive because of a purchasing price that is “a fraction” of the $230 million the Blethens paid a decade ago. In addition, he said the company’s real estate holdings are worth “two-thirds to 100 percent of the total transaction value,” representing collateral to protect investments.
“There is a floor of value in the real estate that very closely approximates the purchase price,” said Brodsky. Other positive factors cited by Brodsky were relatively stable circulation numbers and agreements Connor said he has made with the company’s unions, which include wage concessions and giving workers 15 percent ownership of the company.
Connor and Brodsky would not disclose the proposed purchase price because of a confidentiality agreement they have with the Blethens, nor did they request a certain amount from the trustees. Connor said he has bank financing lined up, but it is contingent on finding $10 million in private equity.
Brodsky, whose firm has pledged about $1.1 million for the purchase, said the deal needs to be completed soon.
“We do not have 30 days to do this,” he said. “It doesn’t need to be done next week but it’s a very tight timeline. I believe we have a couple of weeks. It’s tight.”
The board directed the system’s investment staff and consultants to quickly evaluate the merits of the investment.
Andrew Sawyer, the retirement system’s chief investment officer, said he’s not sure the project is a good fit.
“We do have a view on the transaction as not being appropriate at this time in a private equity program,” said Sawyer. “Our first investment certainly would not, if we moved logically forward, be a direct investment in a local newspaper. That said … if it has investment merit we certainly can report back to the board.”
Leslie said the proposal is worth consideration.
“There are a lot of things that make this difficult,” he said. “I still think we ought to ask staff and the consultant to look at it very carefully.”
Connor said after the meeting that he’s optimistic the deal will go through with or without the retirement system’s money.
“It could fall apart in an instant and it can come together in an instant,” he said. “I think it’s going to happen.”