Katz rejects buyout offer, open to outside management of Inquirer
The battle over the future of the Philadelphia Inquirer has taken an interesting turn, with co-owner George Norcross and his allies publicly offering to buy out adversaries Lewis Katz and H.F. "Gerry" Lenfest for $29 million.
Katz summarily rejected the notion in a brief telephone interview, but indicated he'd be open to an idea proposed by the Newspaper Guild that the warring sides bring in an "impartial industry expert" to run Interstate General Media, the company that owns the Inquirer, Daily News, and Philly.com.
The warfare among company owners erupted in the wake of the Oct. 7 firing of Inquirer editor-in-chief Bill Marimow. Katz and Lenfest sued Norcross and the company in Philadelphia Common Pleas Court, arguing that Marimow's dismissal violated an agreement among investors that major decisions require the approval of a two-person management committee consisting of Katz and Norcross.
Norcross and publisher Bob Hall counter-sued Katz and Lenfest in Delaware, where the company is registered, charging Katz had violated an agreement to stay out of the journalistic decisions of the operation. So the company is now seized by the irreconcilable differences between the pro-Marimow group, Katz and Lenfest, and Norcross, who indicates in public statements that the other three owners, William Hankowsky, Krishna Singh, and Joseph Buckelew are with him.
Judge wants the boys to work it out
Philadelphia Common Pleas Judge Patricia McInerney held a hearing Monday on the question of whether the case should be heard in Philadelphia, as Katz and Lenfest want, or Delaware, as Norcross wants. She took the matter under advisement and then met privately with the parties and their attorneys, then again with Katz and Norcross alone.
Based in part on her comments in court, I'm guessing the judge is signalling that she's prepared to rule the case belongs in Philadelphia, but is telling the warring parties that they should work this out themselves. I'm told there's been at least one meeting of the parties since then. I've also heard that both sides have offered to buy out the other, to no effect.
It's clear this set of owners can't live with each other.
Late Tuesday, the Newspaper Guild, which represents reporters, editors, photographers and others in the company issued a statement saying that if "six of the area's biggest movers and shakers, can't agree to put the interests of our company, our 1,700-person workforce and the region that depends upon our products, ahead of their own egos and personal disputes," then they should "allow an impartial industry expert to run the operation" or sell their stakes in the company.
The Guild said it has contacted other investors and "offered to lead a group to buy out either or both of the warring ownership groups," which both sides have rejected (Guild President Howard Gensler politely declined my request that he identify his potential investors).
Today Norcross and Hankwosky issued a statement offering $29 million to Katz and Lenfest to end "the litigation that has created a sideshow that will ultimately waste hundreds of thousands, if not millions, of dollars in legal fees that could be used to further the strengthen and build the company."
The statement noted that the offer represents a 12 percent return on their investment, and said the offer came of all the owners besides Katz and Lenfest, which own 58 percent of the company.
Katz says no
When I reached Katz, he said Norcross had never put a buyout offer in writing, and he wasn't impressed with his press release.
"I don't know why he will say he won't sell, but we have to," Katz told me. "We don't intend to follow that kind of negotiation."
He added that he'd consider the Guild's suggestion of getting an independent receiver or manager to run the company. "I'm open to anything to get this paper out of this turmoil," Katz said.
Where does this leave us? No place good. I know this region needs strong, independent and well-managed media, and that this company will be demoralized and adrift as long as this paralyzing dispute is unresolved.
I also know players like Katz and Norcross don't settle things like this with press releases. If they're calling each other out in public, it probably means they're digging in for a long court fight and want to manage their images as best they can.
More to come, no doubt. Here are the statements from the Guild and Norcross:
The Newspaper Guild Statement:
What are the workers supposed to do when the infighting of their company's owners jeopardizes both their company and their careers?
That's what's happening at the Philadelphia Inquirer, Philadelphia Daily News and Philly.com, where a group of the region's wealthiest men have taken their disparate views of the company (Interstate General Media), its role in the community and their personal dislike of each other to a new level of wastefulness - recently filing multiple lawsuits against each other in two jurisdictions.
As both sides dig in, there's been name-calling, memo-leaking, email reading and more. There have been owner-on-owner accusations of meddling in the newsroom, killing worthy stories and playing up unworthy ones. This behavior has done only one thing, damaged the company's greatest asset, its credibility.
It can't continue.
The Newspaper Guild, the company's largest union, which represents reporters, editors, photographers, graphic artists and layout personnel at the Inquirer, Daily News and Philly.com as well as IGM staffers in advertising, finance and circulation, has tried to play peacemaker and bring about a quick and inexpensive resolution, but we have been repeatedly rebuffed. With pledges of investment from both the present owners and/or from outsiders we have solicited, the Guild has offered to lead a group to buy out either or both of the warring ownership groups.
Each side has said the same thing: "We're not selling!"
And so we are at a stalemate, unable to move forward and wasting potentially millions of dollars on legal fees, when the company's unions as recently as February, gave back more than $20 million in wages and benefits to help turn around this company's finances.
It's a disgrace.
If the present ownership group, comprised of six of the area's biggest movers and shakers, can't agree to put the interests of our company, our 1,700-person workforce and the region that depends upon our products, ahead of their own egos and personal disputes, we urge them to step back and allow an impartial industry expert to run the operation - or walk away as the same group they were when they purchased the company from its hedge fund owners in a deal that considered no other offers.
Should these owners choose to walk away, the Newspaper Guild will lead a group of interested monied adults with an understanding of journalism, business and Philadelphia to get them out of this investment and bring this painful chapter to a close.
Bill Ross, Executive Director
Howard Gensler, President
The Executive Board of the Newspaper Guild of Philadelphia
Statement from Norcross and Hankwowsky
"We did not want or initiate the litigation that has created a sideshow that will ultimately waste hundreds of thousands, if not millions, of dollars in legal fees that could be used to further the strengthen and build the company. We are, however, prepared to end it by purchasing the minority share of the company owned by Messrs. Katz and Lenfest for immediate cash, with no strings attached.
We are offering to purchase their shares for $29 million, which represents a nearly 12 percent profit over their investment in just over 18 months, not a bad return this economic environment. We will wire the funds to their accounts within 24 hours of an agreement.
We will seek to have as our partners in this effort the newspaper Guild, which represents staff members at the Inquirer, Daily News and philly.com. We believe it is good for the company to have the interests of its leaders and professionals workers aligned. We are pleased that in their public comments, the Guild has recognized that our majority ownership group not only better understands the operations of the company, but that we have a clear path forward.
More than two-and-a-half years ago, when we first met to discuss purchasing the papers and philly.com — a group that did not at the time include Mr. Katz — we did so because we saw clearly troubled journalism properties of great value and importance to the community.
In 18 short months, we have reversed the direction of the company, taking it over when it was losing almost $50,000 a day, every day, to being on the path to profitability today. That turn-around is due in large part to the hard work and sacrifices of the employees of the company, investments in our infrastructure and a dramatically improved home delivery revenue. As we made clear when we purchased the company, we have always been in this for the long-haul.
As our employees know, when we purchased the company we undertook significant market research that showed not only do the three properties not materially compete with each other, they reinforce each other. Together, the Inquirer, the Daily News and philly.com reach an average of 1.95 million readers each week, more than double any other local media property. The papers and philly.com are the undisputed news leader in the area and one of the biggest journalism organizations in the country.
It is time to end this impasse and litigation and return our focus to continuing the remarkable turnaround of the Inquirer, Daily News, and philly.com. It is the right thing to do for the company, our readers, our workers, and the community."