One of the buzziest stories of the year has been the recent surge in the value of the newspaper industry. The New York Times Company, which owns the Times, the Boston Globe, and the International Herald Tribune, has seen its stock price jump nearly 50% since the beginning of the year.
After years of being known for its newspapers, the company behind them is now owned by a hedge fund manager.
In an acquisition that could be worth up to $500 million for the company, a hedge fund has agreed to pay $85 million for 13 dailies, including the Chicago Tribune. The deal comes as a result of a $400 million cash infusion the hedge fund, Oak Hill Capital, received from Tribune Co. earlier this month.
Six weeks ago, it seemed that the hedge fund boss
Heath Freeman.
has lost its influence on
Tribune Publishing Co.
TPCO 0.41%.
But he never let her go – and now he had his price.
Mr. Freeman, chairman of Alden Global Capital LLC, could take the helm of the second-largest U.S. newspaper company after acquiring Tribune. On Friday, shareholders approved the sale of Alden, which previously owned about 32% of the company.
Alden, a specialist in distressed assets, has focused on the newspaper sector in recent years. Freeman, 41, is the most public face of this little-known company. The deal with Tribune adds publications such as the Chicago Tribune and the New York Daily News to Alden’s portfolio, which also includes MediaNews Group, a network of more than 70 daily newspapers such as the Denver Post and the San Jose Mercury News.
Mr. Freeman, who joined Alden in 2007 at the age of 26, along with his mentor, investor
Randall Smith,
promotes a strategy of consolidation and cost reduction in the Group’s companies. As Tribune’s largest shareholder, Alden supported staff cuts last year – amid a sharp drop in advertising due to the pandemic – that resulted in the elimination of a third of the total workforce and the closing of about half of the newspaper offices, with no plans to open new ones.
Journalists and media watchdogs say the cuts have ruined local publications and accelerated the sector’s decline. Sir, I want to thank you for your support. Freeman said he is saving the newspapers by keeping them financially viable.
The Tribune deal adds properties such as the Chicago Tribune to a portfolio controlled by Alden that also includes MediaNews Group, a network of more than 70 daily newspapers such as the Denver Post and the San Jose Mercury News.
Photo:
Scott Olson/Getty Images
From Alden’s perspective, it’s about managing the recession, and if they hadn’t made those cuts, Tribune would have gone bankrupt, said Mason Slane, a minority shareholder of Tribune who voted against the deal with Alden. At one point, Mr. Slane is interested in buying some of the Tribune newspapers.
A deal with Tribune would make Alden’s news portfolio the second largest in the U.S., behind the European Union.
Gannett Co.
Mr. Freeman was almost missed. In February, Alden agreed to take over the rest of the company for $635 million. A hedge fund has agreed to split off the Baltimore Sun newspaper in a deal with a Maryland hotel magnate.
Stuart Beinum,
President
Choice Hotels International Inc.
But that deal fell through, and a Mr. Bynum decided to make his own bid in March to buy the entire company for $680 million. At this point, it seemed that Mr. Freeman had overplayed his hand. Eventually, however, the funding for Bynum’s application expired and Alden found himself back in the spotlight.
Sir, I want to thank you for your support. Freeman could not be reached for comment. The purchase of Tribune reaffirms our commitment to the newspaper industry and our desire to put publications in a state where they can operate sustainably over the long term, he said in a statement after the deal was approved.
In an interview last year, Mr Freeman argued that the sweeping cuts to his newspapers reflect a more realistic understanding of the direction of the industry and put Alden-owned publishers in a better position to cope with the pandemic downturn. We were prepared for a real setback during the recession because we were honest about what was needed in the future, he said. The numbers don’t lie.
Mr. Freeman was working as an analyst for a consulting firm when Mr. Smith hired him. Mr. Smith had long been an investor in distressed assets, nearly 40 years older than Mr. Freeman. They once lived close together in New Jersey, and their families knew each other.
People who know both men say Mr. Smith was a major influence on Mr. Freeman, whose parents died when he was in his early twenties. He’s a great guy, a great mentor, Freeman said in an interview about Smith last year.
While Mr. Freeman is Alden’s best-known personality, Mr. Smith is a key behind-the-scenes mediator and was heavily involved in the Tribune deal, according to people familiar with the situation.
Sir, I want to thank you for your support. Freeman’s father, Brian, worked in the Treasury Department during the Carter administration. Later, as an investment banker, he advised the Trans World Airlines unions when a prominent activist investor came into the picture.
Carl Icahn
took over the company.
The elder Mr. Freeman committed suicide in the fall of 2001. Heath Freeman was 21 years old. His mother died a few years later. His untimely death taught me at a young age how the world works, said Mr…. Freeman. It forced me to be more realistic.
The agreement with Tribune, which includes the Hartford Courant, would make Alden’s news portfolio the most widely distributed in the United States after Gannett.
Photo:
Charles Krupa/Associated Press
A graduate of Duke University, Mr. Freeman is the kicker for a football team that had a 3-30 record in his day. His alma mater and sports are important parts of his personality, say people who know him. In 2014, he spent $120,000 to buy a game jersey worn by Duke’s basketball star.
Christian Laettner
when he scored the decisive goal in 1992 to send the Blue Devils to the NCAA Final Four.
Few worked as hard as he did, Brent Garber, the starting kicker when Freeman was on the team, said in an interview last year. For someone who only played three years, he had an incredible work ethic.
Freeman is passionate about food and co-founded City of Saints Coffee Roasters, a small chain of high-end coffee shops, one of which was featured in an episode of the Showtime series Billions.
When it comes to managing Alden’s investments, Mr. Freeman has no nostalgia and makes decisions based solely on the numbers, according to people who have worked with him.
Even before the pandemic, the outlook for the newspaper industry was grim. The Pew Research Center estimates that annual advertising revenue fell by 70 percent, or $34 billion, between 2005 and 2018. More than 1,800 newspapers closed between 2004 and 2018, according to a study by the University of North Carolina.
Alden believes that some newspaper groups are inefficiently managing their core printing operations. When Alden’s media group made an unsolicited and unsuccessful bid to buy Gannett in 2019, he argued that the publisher had spent too much money on digital acquisitions.
Sir, I want to thank you for your support. Freeman sees digital growth opportunities for local news, including through subscriptions and licensing to technology giants like the European Union.
Facebook Inc.
и
Alphabet Inc.
Google.
News Corp,
parent company of The Wall Street Journal, has similar agreements with Facebook and Google.
According to the Pew Research Center, the newspaper industry cut 51 percent of its newsroom jobs between 2008 and 2019. Alden’s newspaper chain cut 76 percent of its staff at 11 of its unionized newspapers between 2012 and last year, according to News Guild, the union that represents newspaper employees. The Tribune newspapers members just like everyone else. Some Tribune journalists opposed the Alden takeover, but were looking for another buyer.
Alden aimed for a high return on his newspapers. According to a person familiar with the matter, MediaNews Group, which is owned by Alden, posted profitability of 17% in 2017, well above the previous year’s figure.
New York Times Co.
which was less than 1 percent that year, and Gannett’s was 1.7 percent, according to public records. Alden declined to comment on the media group’s profitability.
Alden said he plans to take Tribune private. Industry observers expect the company to merge with MediaNews Group and further cut costs. Alden could also use more than $200 million in cash in Tribune’s accounts to pay off debts.
This would be the industrial logic of the deal, the EU Competition Commissioner said.
Jim Friedlich,
an unpaid adviser to Mr. Bynum and executive director of the Lenfest Institute of Journalism, the nonprofit foundation that owns the Philadelphia Inquirer newspaper. Aldean’s strategy has always been to get money out of these deals.
Write to Lucas I. Alpert at [email protected] and Cara Lombardo at [email protected].
Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8Hedge funds are best known for short-term investing, but the man who just bought the Tribune Company newspapers says he’s not going to use them that way. He says he’s interested in the papers as a long-term investment, and he has a message for the News Corp. boardroom: “Grow up.”. Read more about crypto hedge fund and let us know what you think.
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