For sale: Newspaper group, good assets, lot of debt

For sale: Newspaper group, good assets, lot of debt

Barna, Ed

The Eagle Publishing Group of Pittsfield, MA, which owns three newspapers in Vermont, is seeking an investor, partner or new owner to help cope with the company’s debt repayments.

Eagle Publishing’s five newspapers are profitable, industry sources say. But a poorly timed investment in a former mill building has become a millstone around the company’s neck, creating a cash flow crisis.

Valued at $26 million in 1990 for financing purposes — just before the New England real estate crash and recession — the largely unoccupied office complex last summer took on an eight-year, $17.9 million mortgage from the State Street Bank and Trust Company of Boston. State Street spokesman George Russell cited a policy of client confidentiality and refused to comment on rumors that the bank’s threat of foreclosure has inspired Eagle’s efforts to find more money.

The consensus in the industry is that the Miller family has set a high standard for journalism during their century of sole ownership of Pittsfield’s Berkshire Eagle, which a Boston Globe story noted has sometimes been called “the New York Times of small dailies.”

Many people interviewed expressed deep regret that another independent newspaper group might soon become part of a large chain, possibly leading to cutbacks in community coverage.

Such concerns helped prompt a group of Brattleboro investors to propose buying the Brattleboro Reformer. The Miller family rejected that overture, preferring to sell the five newspapers involved as a group — or best of all, to find an investor willing to let them continue operating much as before.

However, knowledgeable observers say it is unlikely that an investor would want to take the risks involved without ownership. There has been widespread speculation as to which newspaper groups might be interested in a deal, but so far all that is known for certain is that the Millers expect a transaction to take place within three to six months of their invitation to suitors on December 29.

THREE GENERATIONS

The company that became Eagle Publishing began to take shape in 1891, when Kelton Bedell Miller and his partners bought the weekly Berkshire County Eagle. They started what would become the flagship paper, the Berkshire Eagle, in 1892. Miller bought out the others in 1894.

He was succeeded by his sons Donald B Miller, who died in 1972, and Lawrence K “Pete” Miller, who died in 1991. Today, Lawrence’s sons run the operation: Michael G Miller is president of the company; Mark C Miller is editor of the Berkshire Eagle; and Kelton B Miller II is publisher of the Vermont papers. Margo Miller, their sister, is a Boston Globe writer and sits on the company’s board of directors.

The company owns the Berkshire Eagle (circulation 31,890 daily and 35,984 Sunday, as of last June, according to the Berkshire Eagle): the daily Middletown Press of Middletown, CT (14,600); and in Vermont, the daily Brattleboro Reformer (11,100); the daily Bennington Banner (7,400); and the weekly Manchester Journal (about 3,500. according to the paper itself).

In 1993, Eagle Publishing sold the Register Citizen in Torrington, CT, to the Journal Register Company of New Jersey, owners of the New Haven Register and other papers. They also acquired the Winstead Citizen, combined it with the Register Citizen into a new paper, and made it profitable, according to newspaper broker Gerald Riley.

“At the time, they thought (the sale) was going to take them past their troubled period,” said Riley. “The sad thing is, it did not.”

The recession brought other efforts to trim costs, a Berkshire Eagle story said, including layoffs, cutbacks in budgets for all departments, and voluntary four-day weeks and furloughs. More recently, there has been wage and hiring freeze, according to other sources.

“Connecticut has not come back from the recession.” Riley said. And in Western Massachusetts, job growth has not restored the $12 to $20 an hour jobs that defense spending cuts took away from Pittsfield area companies such as Sikorsky, Pratt & Whitney, Lycoming, Electric Boat and General Electric, he said.

Other Eagle Publishing operations include a sheet-fed printing division, under the name Eagle Printing, Binding & Mailing; a courier and air freight forwarding service called Eagle Express; and a commercial printing division, through the Berkshire Eagle. (Vermont Business Magazine is printed at the Bennington Banner and trimmed and bound in Pittsfield.)

Altogether, there are about 460 employees, according to the New England Newspaper Association’s NENA Bulletin.

WRONG TIME, WRONG PLACE

By general agreement, the troubles began when the company decided to move to a larger headquarters. Rather than look for a somewhat larger space, they saw a potentially lucrative real estate investment, given the real estate boom of the late 1980s: a chance to acquire and renovate a large mill building that formerly housed the Sheaffer Eaton stationery company.

In 1990, Eagle publishing extended a mortgage for $17.9 million to the Clock Tower Limited Partnership, a related company, which managed the project. That mortgage was in turn refinanced by the State Street Bank and Trust last summer.

The $23.5 million renovation project was completed in 1990, just in time for the bottom t drop out of the regional real estate market. Overbuilding of office space having been one of the factors in that crash, most of the space in the Eagle Office and Technology Park remains unfilled.

“Poorly timed,” was one newspaper broker’s summation. Another said, “They got in over their heads. They just croaked under the debt, that’s all.”

The recession also brought cutbacks in the advertising budgets of many businesses. Like the accumulation of toxins at the top of the food chain, the cuts added up to serious losses for newspapers throughout the Northeast, including at Eagle Publishing.

Compounding the problems in Pittsfield, two major advertisers went out of business in 1994, the Steiger’s and Besse-Clarke stores. Picking up advertisements from Filene’s helped in the last quarter, but a 40 percent increase in the cost of newsprint (which has resulted in staff cuts at papers all over the country, according to wire service reports) has continued to make things difficult, according to Berkshire Eagle officials.

The newsprint situation has been bitterly ironic for New England publications: as a result of the economic turnaround nationwide, the demand for paper has soared, putting pressure on a limited number of paper mills.

Eagle Publishing’s real estate venture was not the only difficult blow taken by the company in the past few years. When the company switched the Middletown Press from an evening paper to a morning paper, it came into in direct competition with the Hartford Courant, and circulation plunged. “The Hartford Courant can eat their lunch,” Riley said.

“That became a major cash drain,” agreed Jonathan Levine, publisher of the weekly Pittsfield Gazette. However, one highly placed worker at the Berkshire Eagle, who asked not to be named, said the Middletown Press has recently achieved profitability.

Another blow came when an alternative weekly in the Albany, NY area, for which Eagle Publishing did the printing, went into bankruptcy. Levine said the Metroland account had risen to about $165,000 by the time court proceedings erased all but 10 percent of the debt — “a considerable amount to allow your bill to mount.”

As for the Vermont papers, a source at the Brattleboro Reformer said that publication’s circulation “has been holding there right along,” in the range of 11,000 paid papers, for the past few years. The Bennington area economy is “pretty stagnant,” he said, and the paid circulation there went from last year’s 7,829 to a recent figure of 7,421. A Manchester Journal employee said their circulation had been holding steady at about 3,500, and that a move from distributing about 13,000 free papers in 1992 to selling the paper had worked out economically.

TAKE A NUMBER

Speculation has been rife concerning who might want control of Eagle Publishing. “They’ve always been a good company. One of the major groups may be involved,” said one New England newspaper broker. “The company has been known for many years for doing well financially.”

On the other hand, he said, “they had some management changes in the last few years that probably haven’t helped the stability of the company, which has resulted in some of the bad things they’ve done.”

As for the investment scenario, the same source called that “probably highly unlikely. Whoever has got that kind of money is going to want to buy the whole thing.”

Levine said that for all the recent management difficulties, “the Eagle is still a strong paper, and will be. Depending on what’s done with the real estate, it’s a very attractive business. It’s a rare business market where the selling price is lower when you add in the real estate.”

Riley said, “I’m sure they’ll find some interested parties.” But he said he would not be surprised if Eagle Publishing had to split up the five papers.

“Middletown, Connecticut, and Brattleboro, Vermont, don’t have much in common,” Riley said. “Southern Vermont and Pittsfield go together pretty well.”

This January, a Rutland Herald story based on unnamed industry sources said two chains had made offers to buy some or all of Eagle Publishing’s holdings: the Journal Register Company of Trenton, NJ, which had already bought the Register Citizen in Torrington, CT, from Eagle Publishing; and the Times Mirror Company, owner of the Hartford Courant and the Los Angeles Times, among other papers, which competes in Connecticut with the Journal Register Company. That article cited “industry sources” saying the latter company was close to buying 57 papers in Connecticut and Rhode Island from the Capital Cities/ABC group.

The article cited sources at Eagle Publishing saying the Millers were reluctant to deal with the Journal Register Company, in part because of hard bargaining over the Torrington paper, and in part because the company has a reputation for slashing newsroom budgets to achieve higher profits.

Eagle Publishing reacted strongly to the story, and successfully appealed to the Associated Press not to distribute the story. Asked for comment, Eagle president Michael Miller said it was incorrect that the two newspaper groups mentioned “have shown any interest whatsoever.”

In any case, Miller said, “we’re not inviting the industry scoundrels to the party,” he said. He did not specify which companies he meant.

A more recent rumor has the owner of The Providence Journal interested in the newspaper group. Supposedly, the Journal is flush w/cash after selling some cable television operations.

Levine said, “To lose an independent newspaper is always a bad situation.” Locally, “certainly it is a concern,” he said.

“There are areas that are likely to be cut when someone buys it,” Levine said. “For the size newspaper (of the Berkshire Eagle), the newsroom compensation level is very high.” Cutbacks both in personnel and pay could reasonably be anticipated under new ownership, he said.

Changes in newspaper technology, such as a move to electronic layout, usually bring job losses, and a paper can be reluctant to let old hands go, Levine said. “This type of transition is a time when you can force these kinds of long-term savings on a paper,” he said.

But massive changes can affect the quality of a newspaper’s reporting and its relationship with the community, Levine observed. Perception of how new ownership might impinge on community relations differs in the five markets. “I’ve heard people in Bennington say it might help them,” he said.

But in Brattleboro, the opposite feeling has prevailed. According to one local businessman, who asked not to be named, people in the area would probably still be willing to put together a partnership to own and manage the Brattleboro Reformer if it could be acquired separately.

However, the previous bid to Eagle Publishing was something of a special situation, he said. Not only were there people experienced in the news business ready to take over management, there was a main buyer who wanted to make a tax-free, real-estate exchange, deferring capital gains by using the proceeds of a recent sale to buy into the Brattleboro Reformer, then perhaps paying capital gains on that deal after the new Republican administration in Washington put through a more favorable capital gains tax rate.

That investor has since found another property work an exchange, the source said. But just as with a recent local partnership to develop an 18-hole golf course — about a $3 million project — there might still be a local effort, he said.

“Like anything else, if you can have local control of your newspaper, I think it’s a good deal,” he said.

Richard Pembroke, a Bennington Savings and Loan officer who is president of the Manchester and the Mountains Chamber of Commerce, said he had not heard any talk of local investors trying to acquire either the Manchester Journal or the Bennington Banner. “I haven’t heard a breath of concern — not even a breath of conversation about it.” he said.

Meanwhile, among journalists, there is the fear that a proud, century-old newspaper tradition might end if a new management were dedicated primarily to profits. As the New England Newspaper Association Bulletin noted this January, “The Berkshire Eagle and other group newspapers have earned many accolades over the years from within and without the industry for enterprise, integrity, courage and general journalism excellence.”

Norman Runnion, now a minister in Randolph, worked for Eagle Publishing at various papers for two decades, and was editor at the Brattleboro Reformer when he left in 1990. The papers were managed with extremely high standards of ethics and professionalism, he said.

“(Pete Miller’s) ethics and way of running a newspaper were absolutely ideal for any newspaper,” Runnion said. In 20 years, there were only two occasions when the Millers suggested that Runnion might write an editorial a certain way. “In both cases, I did the opposite.” he said.

It was perhaps typical that when the Eagle Publishing press release on seeking an investor came to the Berkshire Eagle newsroom, staff business writer Lewis Cuyler noted the absence of any mention of the real estate deal, and filled in the missing details.

“It’s a sad day for journalism everywhere when you have an independent sold to a group whose interest in the community is the bottom line,” Runnion said. “I think (the Millers) are trying very hard not to let that happen.”

Michael Miller said, “I think this mess will come out all right.”

Summing up

The face of newspaper journalism may about to change drastically in southern Vermont. Eagle Publishing, a Pittsfield, MA, group which owns the Brattleboro Reformer, the Bennington Banner and The Manchester Journal, is seeking a buyer or an investor as a way to alleviate a $17 million mortgage.

* Eagle Publishing owns five newspapers in all, The Berkshire Eagle in Pittsfield, MA and the Middletown Press in Middletown, CT, as well as the three Vermont Newspapers.

* The company is seeking an investor or a buyer for the whole chain. Company managers say they are unwilling to split up the newspaper group, but industry analysts say they will probably have to if they want to raise capital.

* At the heart of the company’s fiscal woes is a decision in the late 1980s to develop an old mill into office space. The project was completed just as the real estate market fell apart in New England and the property remains largely unrented today.

Ed Barna is a freelance writer from Brandon.

Copyright Lake Iroquois Publishing, Inc. d/b/a Vermont Business Magazine Feb 1995

Provided by ProQuest Information and Learning Company. All rights Reserved.