San Diego Union-Tribune Finds Discount Buyer
As Originally Posted to The Wall Street Journal

A California private-equity firm clinched a deal -- at a rock-bottom price -- to buy the San Diego Union-Tribune newspaper, one of the few large dailies that have found a buyer as industry profits sag.

Platinum Equity, a Beverly Hills firm specializing in distressed deals, is leading the acquisition of the Union-Tribune, which was put up for sale in July by closely held Copley Press Inc. David Black, owner of the Akron Beacon Journal and a string of Canadian papers, also is part of the buying group.

The Union-Tribune is the country's 23rd-largest newspaper, with weekday circulation of nearly 270,000.

The deal price wasn't disclosed, but a person familiar with the matter said it was less than $50 million, a price largely driven by the Copley Press real estate, which includes the complex housing the Union-Tribune and another facility. The value of the assets -- even amid a downtrodden real-estate market -- gives the buyers some cushion against the struggling newspaper, according to people familiar with the matter.

The fire-sale price reflects the dried-up market for big newspapers. A number of papers have been put up for sale in the last year, but bankers say suitors are staying on the sidelines while it is hard to predict when advertising declines will hit bottom. E.W. Scripps Co. recently closed the Rocky Mountain News and Hearst Corp. this week ended the print edition of its Seattle Post-Intelligencer after the papers attracted no serious offers.

There are growing calls to ease regulations limiting newspaper consolidation so papers can seek merger partners. Attorney General Eric Holder told reporters Wednesday he was open to re-examining the policies.

The Union-Tribune attracted several suitors, including Ronald Burkle's investment firm Yucaipa Cos. and newspaper publishers MediaNews Group Inc. and Tribune Co. Several buyers said they were dissuaded by the paper's rapidly declining profits.

The Union-Tribune deal is a startling turnaround for its controlling Copley family. The paper generated about $100 million in cash flow in 2004, according to people familiar with the paper's finances, meaning the Union-Tribune could have been worth $1 billion based on valuations at the time. Now, the paper is close to break-even, these people say, as it has been battered by the collapse of newspaper classifieds.

In an interview, Mr. Black said he is "a big believer in newspapers, as is Platinum Equity" and that the Union-Tribune's location, readership and Web site made it an attractive property.

Mr. Black said he will have to cut costs to help offset the bleak newspaper revenue outlook. "In this case the paper hasn't had [cuts] as of the sale process and a whole lot of other papers have," Mr. Black said. "There's some catch-up there."