Philly Inquirer minority owners win control with $88M bid

The ownership of Philadelphia's two largest newspapers changed hands again Tuesday after minority owners Lewis Katz and Gerry Lenfest emerged victorious in a bidding war against other owners.

In an auction held at a local law firm, Katz and Lenfest grabbed control of Interstate General Media Holdings -- the parent company that operates The Philadelphia Inquirer, The Daily News and Philly.com -- by agreeing to pay $88 million, including about $15 million in debt.

George E. Norcross, Joseph Buckelew and William Hankowsky – the other investors who joined to form a local investor group that bought the papers in 2012 for $55 million – initiated the bid with a $77 million offer but chose not to counter Katz and Lenfest's offer.

"Although we declined to submit a higher bid and will not purchase the shares of Interstate General Media owned by Messers. Katz and Lenfest, we are happy for the company's employees, readers and advertisers that this issue is now resolved," said a statement from Norcross' group, which owned about 54% of the company. "It is time to return the company's focus to journalism, and away from conflict among its owners."

The working relationship among the owners deteriorated quickly after the 2012 purchase as the two camps collided over editorial philosophies and personnel issues. Katz, who emphasized investigative reporting over the hyper-local news approach favored by Norcross, filed a motion in January to dissolve the ownership structure and called for an auction to settle the matter.

The owners' infighting reached a boiling point last October, when the Inquirer's editor Bill Marimow, was fired by publisher Bob Hall. Katz went to court to reinstate Marimow, and a local judge granted the request after several days of hearing.

According to a report posted on Philly.com, "scattered applause" broke out in the Inquirer newsroom as the auction result was revealed in late morning. Marimow received congratulations and handshakes from staffers, it said.

Katz and Lenfest didn't reveal specific changes that will result from the ownership change, but they will begin a search for a new publisher to replace Hall. Lenfest will serve as interim publisher while the search is conducted, according to Bill Ross, executive director of The Newspaper Guild of Greater Philadelphia, which represents union employees.

"We're all being optimistic right now," Ross said. "You have two owners who have deep pockets and who are well-known in the community and made a major investment in the product that unfortunately has been declining in value. If anybody can make it work, who better than two local billionaires that everybody here knows?"

Like other large metro dailies in the U.S., the Inquirer has undergone several ownership changes in recent years -- five times in the last eight years -- as its value plummeted along with the print advertising market.

Local investors, led by advertising executive Brian Tierney, bought the papers in 2006 from The McClatchy Company. In 2009, Tierney's company filed for bankruptcy protection. And the assets were eventually acquired by a group of hedge funds and banks in a bankruptcy court auction.

While the fogginess surrounding ownership seems to be finally clearing, the newspapers' financial challenges remain. Despite the owners' additional investments and job cuts, the newspapers hadn't been profitable in years and are still losing money.

In the decade before Katz and Norcross assumed control, the company's revenue had fallen from about $500 million to about $200 million. It went from generating $145 million in profit to losing as much as $50,000 a day, Norcross' group pointed out Tuesday.

From 2006 to 2011, about 400 jobs were cut through layoffs and buyouts, Ross said. The company now has about 2,000 employees, including temporary workers.

"We always understood that no matter who won the auction, there was a great deal of work to be done. Now, with this chapter ended, we hope the company can return its focus to accomplishing that needed work," Norcross' group said in its statement. "We wish Messrs. Katz and Lenfest the best of luck moving forward."