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June 2000

The Year of
Stalemate and Sitzkrieg
The ESOP Is No Fable

Dispatches from the Front by Burl Burlingame
6/1/00 Our ESOP committee was busy researching and organizing. Given what happened to our ESOP bid back in 1992, we are determined this time that the process be taken seriously, and that the court recognize the offer as legitimate. Unlike 1992, however, there aren't as many tax incentives for investors to tie in with an employee buy-out. The best solution, appearing through the murk of finance, appeared to be a partnership with a serious buyer.
6/2/00 We won a graphics award in the Best of the West competition.
6/3/00 I got a call from a fellow at the Garden Island, a Pulitzer-owned newspaper, making an "unofficial" query into affairs at the Star-Bulletin, a preamble toward making a bid for the product. While it would be nice to have a major chain buy us, that rubs recent history the wrong way. The big chains are divvying up the United States between them and refusing to compete.
6/6/00 The Star-Bulletin ESOP group went public. Indicating high levels of frustration with the sales process, within a week, nearly all staffers and management signed a letter of interest.
6/7/00 Gossip from across the hall indicated that the Gannett Advertiser editors were still smarting from "losing" in the Hawaii Publishers Association awards -- even though they did respectably -- and were planning to boycott future awards. Like the ad says, you can't win if you don't enter!
6/8/00 Gannett acquired another 21 newspapers from the Thomson Corp., a billion-and-a-half dollar deal brokered by Dirks, Van Essen & Murray, the same organization handling Gannett's sale of the Star-Bulletin. They claimed no conflict of interest, ha-ho.
6/9/00 In San Francisco, the judge threw up his hands and asked the Justice Department to step in and explain what's going on with conflicting anti-trust claims raised by all parties. Justice agreed. We were watching each story closely as developments mounted -- whatever happened there will create aftershocks here.
6/10/00 The so-called "book" of financial information about the Star-Bulletin provided by Gannett turned out to be nearly-worthless, a "joke" as bidder Sam McKenna termed it , and an indicator that Gannett wasn't serious about allowing the paper to be sold. They're playing for time, trying to keep out of court.
6/13/00 With less than a week to go before the court-ordered deadline for bidders to show their faces, things were confused and roiling. We on the ESOP committee were busily tryiing to meet with potential buyers to sound them out. Some were complete knuckleheads, and we were afraid Gannett would insist on the idiots, and then leisurely shoot them out of the box after the sale. Such a scheme would have been very similar to what they pulled in 1992.
6/15/00 Judge Kurran, after a status conference to hear complaints from bidders about Gannett's footdragging in the sales process, agreed to drop certain requirements from the bids. The highest-profile bidder was former congressman Cec Heftel, whom, oddly, I had joked with a couple of months earlier at an SPJ function. "You wanna buy a paper, cheap?" says I. His eyes lit up. "Owning a newspaper in Hawaii wouldn't be a bad way to retire," he exclaimed. Apparently, he remembered us.
6/17/00 The Star-Bulletin won 33 awards, the Advertiser 13 in the Hawaii Society of Professional Journalists annual awards. Even though the Advertiser won some significant awards, I spotted editor Jim Kelly shaking with rage as he stalked out. We were pretty happy about the wjhole thing, naturally. At left, Ian Lind snapped me, Mary Poole and George Lee afterwards. I was saying to Ian at that moment, "Time to update your freakin' resume!"
6/18/00 Those won won SPJ awards on the Advertiser side have no idea they've won until we congratulate them. Seemed their Gannett editors declined to inform their own staff members they had won.
6/19/00 On the deadline for expressions of interest among potential buyers, media mogul Cec Heftel weighed in, despite earlier rumors of dropping out. He is appalled by Gannett's conduct: "They wasted time as they worked at discouraging people," says Heftel. "The community wants and needs two newspapers."
6/20/00 The day following the deadline for expressions of interest in purchasing the Star-Bulletin, a story appeared in the Advertiser giving the impression that Star-Bulletin staffers are independently negotiating changes in their Guild contract. This was absolutely untrue.
6/21/00 A grudging clarification was run in the Honolulu Advertiser about the previous day's ESOP story, blaming the reporter for Gannett additions. In the meantime, we elected a couple of ESOP members permission to access the "private" financial records as part of the process of consolidating our own bid for the paper. We are determined to be players, not victims.

Tense contract negotiations resume between Gannett and Hawaii's newspaper unions. Because of the pervasiveness of the Internet, Gannett wants to ban freelance writing for employees. For older material, Gannett's bizarre position seems to be that staff still has the right to resell their work, as long as it's not in this solar system.

6/23/00 The deadline for bids was extended again, to no one's surprise. This won't be an overnight deal. Bidders have until Aug. 4 to cough up. Our ESOP committee now has to do things secretly, which caused some grumbling on the staff, but hey, this is business. And as we concentrate on the business end, little thing seem to jump out Ithat would have passed by before. For example, I spotted a line in an Advertiser story about the paper's assets:

"Star-Bulletin assets include its subscriber and advertiser lists, its Internet Web site, its masthead (the title on the cover), office furniture and leases.
Other assets include eight Macintosh computers, about 800 news racks, two Saturn sedans, two Plymouth vans, 10 cargo vans, and the publisher's 1994 Honda Accord..."

Two Saturn sedans? Huh? No one has ever seen these mystery vehicles. I made a pain in the ass of myself, queying everyone I met about it. Publisher John Flanagan just shrugged. Poor guy will lose his car, I guess, when the paper folds or is sold. Tsk.

6/25/00 Hawaii's newspaper unions held a meeting on the progress of contract negotiations. It was hoped that the sale of the Star-Bulletin won't affect contract talks, and that contract talks won't affect the sale of the paper.
6/27/00 A "data room" opened for prospective Star-Bulletin buyers, hopefully with enough accurate data for buyers to make an honest decision.
6/28/00 Damn, Gannett was really blowing it's wad. Now they were buying the Arizona Republic, Indianapolis Star, and several other dailies owned by Central Newspapers. Price tag was $2.6 billion, in addition to the $1.1 billion earlier this month for 21 papers bought from Thomson. I imagined Carl Sagan saying "BILLions and BILLions!"
6/29/00 Gannett demanded an immediate accounting of all of our computers RIGHT NOW and so clerks were scrambling all over the newsroom on deadline scribbling down serial numbers.
6/30/00 In a breezy manifesto, Gannett news honcho Phil Currie declared it's "a great time to be in journalism" as Gannett scuttled its disastrous News 2000 program.
NEXT! July 2000
The Bids Come In, The Bids Go Out

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