The Seattle Times Co. wrote a new chapter to a long-running financial cliffhanger Monday, March 17, announcing it is putting the Blethen Maine Newspapers chain up for sale, a decade after it borrowed about $230 million to buy the three dailies and a weekly. Calling the decision "painful," Times Co. CEO and Seattle Times Publisher Frank Blethen said selling the Maine papers offers the best chance for their survival and the long-term survival of the Seattle Times Co.'s four Washington daily papers, including the flagship.
Blethen, whose Seattle-area family owns the 50.5 percent controlling interest in the privately held Seattle Times Co., engineered the purchase of the Maine papers in 1998 as a centennial tribute to his family's roots. Times founder Alden J. Blethen came west from the Pine Tree State. But critics, including the company's minority owner at the time, Knight Ridder, said the Maine purchase never made much business sense and was an expensive bit of ancestor-polishing.
There's some truth to that. Maine's growth is projected at an anemic half-percent per year for the next decade, and the Maine papers, like others around the U.S., have seen serious circulation and advertising erosion in recent years. Last August, management at the Portland Press Herald and Maine Sunday Telegram, the Maine chain's flagship, told the paper's union that the Press Herald had lost 27 percent of advertising lineage during the previous two and a half years.
The Maine purchase has weighed down the company's corporate balance sheet here in Seattle, as well. Since borrowing to buy the chain, the Seattle Times Co. twice has failed to meet loan requirements, forcing a renegotiation of the debt with a consortium of lenders. The company says it is losing money, and Frank Blethen warned late last year of plans for deep budget cuts.
Arguably, the Times Co., which had no significant debt when it bought the Maine papers, would have handled the past decade's downturn more easily without the Maine loan. Blethen, however, has blamed the Times joint operating agreement (JOA) partner, the Hearst-owned Seattle Post-Intelligencer, and Seattle Times unions, which struck for 49 days in 2000-01, as the sources of the company's financial troubles.
In hiring Dirks, Van Essen & Murray, a Santa Fe, N.M., newspaper brokerage, the Seattle Times Co. might be signaling it is under pressure to undo ties to Maine quickly. Dirks, Van Essen is the nation's biggest newspaper brokerage, handling sales of papers for Dow Jones, Gannett, and McClatchy. In 2006, it brokered the King County Journal Newspapers sale to Black Press. But newspaper owners traditionally shop their papers less publicly, preferring to wait to announce a sale, not an offer.
And selling off a chain of small papers in a slow-growth market like Maine could be a challenge. "I have no idea who would buy this chain," said Jeff Inglis, editor of the Portland Phoenix, the city's alternative weekly. Inglis, who covers the Maine newspaper industry, said rumors that the Seattle Times Co. was getting ready to dump its Maine holdings have been circulating for more than a year as the local chain's finances have soured. Charles Cochrane, the Maine chain's president and chief executive, told the Portland Press Herald the chain's profits have been shrinking in recent years. The Press Herald cut 27 jobs last week and has had an uneasy relationship with its union. Another paper in the chain, the Waterville Morning Sentinel, has had a long-running byline strike by union members over a contract dispute.
"There's no question they're going to get a lot less than they paid for it," said Lou Ureneck, a specialist in newspaper economics and head of Boston University's journalism department. Ureneck, who was editor of the Press Herald before the Seattle Times Co. bought the Maine papers, said it isn't likely that large national newspaper chains would be interested in bidding. "Maine is a poor state," he said, "not a Sunbelt state with growth potential."
A more likely prospect, Ureneck said, might be someone with money and close ties to the state. "There's a lot of old money in Maine," he said.
Ironically, Portland's newspaper union may be one of the few serious bidders willing to take up the Times Co. offer to sell. The Portland Newspaper Guild Local 31128 was one of three top bidders 10 years ago, when the Guy Gannett company sold the chain to the Seattle Times Co. William Dean Singleton's MediaNews Group was the high bidder but was passed over. C.J. Betit, the Guild local's administrative officer, said the union bid for the chain under an employee ownership plan in 1998 and will be exploring a similar bid this time around.
"We believe the Blethens have been debt strapped since they bought the chain," Betit said in an interview with Crosscut. "I don't think this sale announcement came as a complete shock given what's been going on in Seattle."
But the union, which represents about 150 Press Herald employees and 25 more at the Waterville paper, would have to come up with financing and isn't likely to match its previous offer for the Maine papers, Betit said. "I think the market for the chain has definitely fallen since 1998," he said.
A spokesperson for the Seattle Times Co. could not be reached for comment, but the Press Herald quoted Blethen as saying that "a reasonable assumption" would be that the Maine chain would sell for half the price the Seattle Times Co. paid a decade ago.
That might be wishful thinking, given the cash-strapped state of the newspaper industry these days. And whether it would be enough to bail out the struggling Seattle Times Co. mothership isn't clear. A key item is how much of the Maine debt is left on the Times Co. books after two lender renegotiations and an additional $24 million the company had to borrow last year to pay Hearst in settling a four-year legal squabble over the joint operating agreement.
The Seattle Times Co. is privately held and doesn't disclose its finances. But McClatchy, which owns 49.5 percent of the Seattle Times Co. and does report publicly, wrote down its Times Co. stake last year from $120 million to just $19 million. That book value includes McClatchy's share of the Maine papers, although it probably does not reflect their street value because any buyer would control the Maine papers outright, while McClatchy, as minority owner, has little say in Seattle Times Co. operations. A McClatchy spokesperson said the company had no comment on the Times Co. decision to sell the Maine papers.
Still, the Seattle Times Co. announcement has a ring of desperation. Unloading the Maine chain "does not mean that we are out of the woods," President and Chief Operating Officer Carolyn Kelly said in a memo to the Seattle Times staff on Monday.
Boston University's Ureneck says Kelly could be understating the situation. "This is the worst possible time to sell real estate or a newspaper chain," Ureneck said. "Their timing is just horrible."