What Honolulu deal says about more paper sales

[Sign of times? Gannett has owned Advertiser since 1993]

In Hawaii's state capital, Gannett faced a situation unique among its 84 U.S. newspaper markets: A 600-employee daily that had begun losing money by 2008. A two-newspaper city. A patient investor willing to take the risk of combining the papers. And a balance sheet (Gannett's) sorely in need of more cash.

With all that, it's a wonder Gannett didn't sell The Honolulu Advertiser earlier, assuming Canadian investor David Black was willing to bargain. After all, the Advertiser was losing millions as recently as October 2008; that was when the union representing most of its employees got a peek at the books, before conceding the paper was swimming in red ink. Only then did the labor group, bitterly fighting for a new contract, agree to some of Gannett's cutbacks.

So, why now?
For one thing, the Advertiser may have returned to profitability; that's what I hear Gannett newspaper division finance chief Evan Ray told staffers yesterday when the deal was announced. That would make it more attractive to a buyer.

There are economies of scale. Black owns the smaller cross-town Honolulu Star-Bulletin. He plans to put that paper up for sale. Assuming no buyer steps forward -- a likely scenario -- he'll then combine the two papers under a renamed flag. This all assumes, of course, that Gannett and Black get regulatory approval -- no sure thing under the Obama Administration, as I wrote earlier today.

The newly re-structured paper will be one of 80 or so Black owns in Canada, plus two dailies new to his portfolio: the San Diego Union-Tribune, which he bought last year with a private equity firm, and the Akron Beacon Journal; he bought that daily from McClatchy for $165 million, according to this morning's Advertiser story.

Gannett's announcement didn't disclose sale terms, and none of the stories I've read even hinted at what Black paid. Likewise, none of the stories suggested Hawaii's dreary tourism-based economy is heading for a sudden recovery. Wall Street greeted the news with a big yawn today: GCI recently traded for $15.15 a share, down 1%. Instead, Black is portrayed as an experienced and patient owner willing to ride out the recession.

"I give the guy high marks for tenacity," Gerald Kato, a University of Hawaii-Manoa journalism professor, told the Advertiser yesterday. "I've always thought that any bottom line-oriented businessman would have pulled out of this market long ago."

No Wall Street pressure
Black has another, significant advantage over Gannett: He's not subject to the same relentless Wall Street pressure to boost profits, quarter after quarter; his companies are privately owned.

Are there more Blacks in Gannett's other U.S. markets? The answer depends on whether any of the other 83 newspapers are losing money, or close to running a deficit. As well, Gannett would need equally brave and patient (and possibly foolish) local investors. The economy's got to show more signs of steady recovery. And the credit markets must open further, so investors can tap financing. One thing's certain: As always, Gannett is willing to bargain at the right price.

Is your market ripe for a change in newspaper or TV station owners? Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.

[Images: today's papers, Newseum]