Employee union prepares offer to buy Daily News.

Sale announcement prompts employees to eye ESOP 

The Los Angeles Newspaper Guild is "preparing" to make an offer for the employees of the Daily News in the San Fernando Valley to purchase their paper through an Employee Stock Ownership Plan, said guild administrative officer Jim Smith.

Daily News employees and others in the publishing world learned last week that Jack Kent Cooke Inc. had placed the suburban daily on the market and hired an investment banker to explore offers for the paper.

The guild, which represents the paper's editorial department (news) employees, is "very concerned about who will buy it. It could be a worse owner than Cooke," said Smith. "We are preparing to make an offer, but we don't know what base price they'll entertain."

Speculation last week about other possible buyers centered on Thomson Newspapers of Connecticut, a subsidiary of Thomson Corp. of Canada. Thomson already owns the local suburban San Gabriel Valley Daily Tribune, Pasadena Star News and Whittier Daily News, with a combined circulation of more than 100,000. The Daily News has a circulation of more than 210,000.

Andrew Perrin, the Thomson executive in charge of newspaper acquisition, said last week that he had "no comment yet."

He acknowledged that Thomson buying the Daily News "makes sense on paper" but said the company is currently reviewing its future "game plan," having recently hired several new executives.

Smith and a local Thomson employee said there are rumors circulating in both camps about a possible Thomson buy-out.

Over the past two years, rumors have circulated that the New York Times Co. was interested in buying the Daily News. But securities analysts noted last week that the company recently bought the Boston Globe - plus the New York Times Co. prefers to own the dominant paper in a city.

Analyst Mary Ann Winter of Brown Brothers Harriman said the idea of a New York Times buy-out now was "very far-fetched."

Likewise, observers agreed that Times-Mirror Co. would likely be precluded by anti-trust laws from operating the Daily News, and that Gannett Co. Inc. and Knight-Ridder Inc. are unlikely buyers because of the competitive situation with the Los Angeles Times.

One other possible buyer mentioned was Copley Los Angeles Newspapers, which owns the Daily Breeze in Torrance, the Outlook in Santa Monica and the News Pilot in San Pedro.

The Washington Post published a story last week predicting that Cooke would take a loss on the sale of the Daily News. Cooke paid $176 million for the publication in 1986 and spent another $79 million on printing presses.

The paper has been valued by analysts in recent years as being worth anywhere between $50 million and $200 million. Cooke was quoted by the Post last year as saying $200 million was "asinine" because it was too low.

Circulation of the Daily News has increased more than 40 percent in the past seven years, but the paper fell on hard financial times in the early 1990s, which led to layoffs. Smith said management reports that the paper is now profitable, although Cooke is not required to release financial information, since his company is privately held.

The guild's contract with Cooke expired last February and the employees have been working under an extended contract while negotiating a new one. Smith said he's not worried about more lay-offs, since the staff was "pretty well pruned back to the bare minimum last summer."

Cooke released a statement last week saying that it had learned of interest from potential Daily News buyers while selling six small papers in Arizona, New Mexico and Colorado. With the sale of those six papers and the Daily News, Cooke will have divested itself of all its newspapers. The company plans to concentrate its business activities in the East and is negotiating to buy a group of broadcast properties, the statement said.

Cooke executives would not comment at all on the situation and refused to divulge the names of the other six newspapers.

The Business Journal has learned that one of those papers is the Payson Round-Up in Arizona, which is being sold to the owners of the Lawrence Journal-World in Lawrence, Kan. The Washington Post reported that two of the other papers Cooke is selling are in Steamboat Springs, Colo., and Deming, N.M.

A Times-Mirror spokeswoman said that company had no comment. Executives at the Payson Round-Up and the Journal-World could not be reached for comment.