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The Honolulu Advertiser
Posted on: Wednesday, April 28, 2010

Path cleared for Black to purchase Advertiser


BY Rick Daysog
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

The U.S. Department of Justice has approved the sale of The Honolulu Advertiser, established in 1856, to David Black, owner of the Star-Bulletin.

GREGORY YAMAMOTO | The Honolulu Advertiser

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Star-Bulletin owner David Black plans to complete his purchase of The Honolulu Advertiser on Sunday after obtaining approval for the buyout from the U.S. Department of Justice.

The move will allow Black to merge the Star-Bulletin and The Advertiser, leaving Honolulu as a one-newspaper town. The consolidation likely will result in hundreds of layoffs.

"It appears that there will be a large amount of employees out of work in several weeks," said Wayne Cahill, administrative officer for the Hawaii Newspaper Guild.

A management company, HA Management, will take over operations of The Advertiser on Monday and will run the company for one to three months as the two papers are merged.

Justice Department officials informed Black yesterday that they had completed their investigation into Black's purchase of The Advertiser and efforts to sell the Star-Bulletin and approved the deal, Star-Bulletin publisher Dennis Francis said.

As part of the purchase agreement, Black promised the Justice Department he would make a good-faith effort to sell the Star-Bulletin, which would let readers and advertisers continue to benefit from competition.

At least two investor groups Texas private equity investor Brian Ferguson and local Internet publisher Malia Zimmerman together with state Sen. Sam Slom submitted bids for the state's No. 2 newspaper. They both said their bids were hampered by a lack of information from Black.

Meanwhile, local politicians raised concerns that Black wasn't allowing enough time for investors to step forward and put together a successful offer. The Bulletin sale was first announced in late February.

"I'm sad to say that from the beginning, it was evident to anyone that had looked over the materials that the publisher of the Star-Bulletin had no intention to sell the newspaper, to continue a viable independent editorial voice or to preserve the jobs of many hundreds of people of both newspapers that are now in jeopardy," said Slom, R-8th (Kāhala, Hawai'i Kai), in a Senate floor speech.

Slom said he and Zimmerman wanted to acquire the Star-Bulletin. However, he said he was blocked from getting complete information about the paper's finances and assets.

Ferguson, managing member of Anthem Newspaper Holdings, added, "I would just say at the end of the process there was information that we requested and did not receive a response on. That certainly impaired the amount we were willing to bid for the assets being sold."

Francis said that the financial information made available to bidders was approved by the Justice Department. He said the company also was willing to provide answers to any follow-up questions.

"To say that in any shape or form that we were less than cooperative is totally false," Francis said.

Zimmerman said Justice Department officials told her yesterday that her offer for the Star-Bulletin was rejected because it was below the minimum liquidation price. She and Slom originally offered $2.25 million but lowered the bid to $250,000 after reviewing the assets with their experts, she said.

The state Legislature and City Council recently approved resolutions calling for Black to delay the sale and allow bidders additional time to craft a deal.

Founded in 1856, The Advertiser is the state's largest newspaper with a daily weekday circulation of about 115,000 and about 600 employees.

The Advertiser has been owned by Gannett Co., publisher of USA Today, since the early 1990s. Gannett is helping to finance Black's purchase of The Advertiser with a $40 million loan. Evan Ray, Gannett's senior vice president for finance and operations, said in February that Gannett was selling The Advertiser because Black made a substantial offer, which has not been disclosed.

The Star-Bulletin, established in 1882, distributes about 52,000 copies each day, but only 37,000 count as paid circulation. It has about 300 employees. Black said the paper has lost more than $100 million during the past nine years.

Francis said yesterday that Star-Bulletin editorial staffers, who have a union contract, will be retained when the papers merge. In a filing with the state Department of Labor and Industrial Relations last month, the Star-Bulletin said it could terminate as many as 150 Star-Bulletin workers once it completes its merger.

The company has not said how many Advertiser workers would be laid off when the merger is completed, but the cuts at The Advertiser could exceed those at the Star-Bulletin given the job redundancies at both papers, Cahill said.

"It's kind of sad," said Gerald Kato, a University of Hawai'i-Mānoa journalism professor. "The cost of this deal is such that they're going to be looking for ways to cut."

Francis said the merged news operation will have its headquarters at the Star-Bulletin's Restaurant Row offices. The paper will be called the Honolulu Star Advertiser.