The legal war: attorneys, brokers helped decide the future of the Arkansas Gazette.
"Is that right, Phil?" Hussman asked his attorney, Philip S. Anderson of Little Rock, who attended the news conference at the Statehouse Conference Center.
A weary Anderson nodded.
The final battles of the Little Rock newspaper war were fought not by editors, reporters and photographers but by attorneys, newspaper brokers and bankers.
Through thousands of pages of filings with the Department of Justice, they decided when and how the war would end.
Anderson, 56, has been the attorney for Hussman since the 44-year-old media magnate bought the Democrat in 1974.
In dealings with the Gannett Co., which purchased the Gazette in October 1986, Anderson represented Hussman's Camden News Publishing Co., the parent company of Little Rock Newspapers Inc.
Little Rock Newspapers, in turn, owns the Democrat.
It was Little Rock Newspapers that technically bought Gazette assets from Gannett.
On July 3, Anderson sat across a table from attorneys employed by the Washington law firm Nixon Hargrave Devans & Doyle. They were representing Gannett.
Also across the table was Gannett's vice chairman and chief financial officer, Douglas McCorkindale.
Gannett has shopped the Gazette quietly and unsuccessfully prior to July 3. When Anderson and Hussman subsequently approached Gannett about buying Gazette assets, a deal was cut -- pending Justice Department approval.
Counting The Days
Hussman wanted an agreement under which Gannett River States Publishing Corp. would sell assets to Little Rock Newspapers.
"Walter Hussman was not interested in buying a going concern," Anderson says.
Contracts were signed July 3.
From then until Aug. 2, attorneys exchanged sensitive, competitive information -- primarily financial statements -- in preparation for filing a Hart-Scott-Rodino form with the Justice Department.
No executives from Little Rock Newspapers or Gannett were allowed to see the information the lawyers shared.
Following the 29-day preparation period, this legal chronology unfolded:
* Aug. 2: Camden News Publishing filed a form in conjunction with the Hart-Scott-Rodino Act. Under Hart-Scott-Rodino, Camden News Publishing was required to make simultaneous filings of its intentions to purchase Gazette assets with both the Justice Department and the Federal Trade Commission.
According to Anderson, the Justice Department and the FTC worked out jurisdiction concerns between themselves.
* Aug. 5: Camden News Publishing voluntarily submitted information to the Justice Department.
* Aug. 8: The Justice Department requested additional information from Camden News Publishing.
* Aug. 9: Camden News Publishing sent additional information to the Justice Department.
* Aug. 30: The Justice Department made a second request for information from Camden News Publishing and Gannett.
* Sept. 12: Camden News Publishing sent eight boxes of documents and videotapes to Washington in response to the Aug. 30 request.
"We even sent tapes of television commercials to them," Anderson says. "They wanted to see competitive advertising, anything that had to do with competition."
The 1984 antitrust suit filed by the Patterson family of Little Rock, then owners of the Gazette, against the Democrat was not a factor, Anderson says.
In 1986, a federal jury ruled that the Democrat was innocent of allegations it was trying to run the Gazette out of business through unfair trade practices.
"The Justice Department really looked at the situation from the time after the lawsuit," Anderson says.
* Sept. 20: The Justice Department received additional information from Camden News Publishing and Gannett. Camden News Publishing submitted 26,330 documents and three volumes of exhibits.
"The second request required an enormous amount of information -- ad rates, profit-and-loss statements going back years," Anderson says. "They also wanted historical information. We kept the copiers going up here almost around the clock for a couple of weeks grinding out the necessary information."
Just as in a lawsuit, interrogatories were filed.
Anderson estimates 10 boxes of information were mailed to Washington. The Gannett filing was even larger because it included information on efforts to sell the Gazette.
* Sept. 23: Newspaper brokers Rupert Phillips and Gerald Reilly began searching for a buyer for the Gazette. The brokers were hired by Gannett at the request of the Justice Department.
It was not for show, Phillips says. He and Reilly would have been paid a large commission for a sale.
* Oct. 15: The brokers reported to the Justice Department.
"In my opinion, there is not a viable buyer out there," Phillips said.
* Oct. 18: Camden News Publishing and Gannett received a confirmation letter from the Justice Department indicating there would be no challenge to the acquisition.
"The department's decision not to challenge the merger of the two newspapers comes after an extensive investigation in which it concluded that the Arkansas Gazette is a failing firm and that no other less anti-competitive purchaser for the Gazette exists," the news release from the Justice Department said. "Under established antitrust doctrine, an otherwise anti-competitive merger will not be challenged if the acquired business is financially failing, if it cannot emerge successfully from reorganization under the Bankruptcy Act and no other less anti-competitive purchaser for the business exists."
Because the Gazette was considered a failing company, neither Hussman nor Gannett were required to give employees a 60-day advance notice of the newspaper's closing under the federal Worker Adjustment and Retraining Notification Act.
Such a public notice would have ruined the "opportunity to get new capital or business," according to the act.
Anderson says the Gazette easily passed the "failing firm doctrine."
Gannett financial records show the Gazette lost $50 million during the past two years, according to Hussman.
The key to Justice Department approval was proof that there was no other buyer in the market.
Phillips and Reilly contacted more than 100 potential buyers, including every major newspaper chain in the country and all of what Phillips calls the high-profile, financially capable people in Arkansas.
"There was a little bit of excitement a couple of times, but that was before they got the financial material and reviewed it," Phillips says. "When that happened, it was discouraging to everybody."
Several potential buyers laughed when Phillips called.
Phillips, who owns a daily and two weekly newspapers in Arkansas, says he and Reilly were simply looking for offers. There was no asking price for the Gazette.
"We did not have one serious offer saying, 'We'll give X dollars for it,'" Phillips says.
An 11th-hour attempt by Gazette employees to secure independent financial backing only delayed approval, according to Anderson.
"I don't think they ever had any real money," he says.
Phillips says Little Rock businessman Walter Smiley and television producer Harry Thomason were the first potential buyers who had a real interest in purchasing the newspaper.
"Mr. Smiley worked on it for one week," Phillips says. "He said he could get the |annual~ losses down to a certain level but no lower. The problem for a lot of buyers was not the money up front but suffering the losses."
By the morning of Oct. 18, Anderson and Hussman were desperate to complete the deal.
Anderson says Gannett wanted to close the Gazette immediately. There was one problem -- Hussman did not have the $69.3 million on hand.
"The final stages were an absolutely amazing thing," Anderson says. "The loan documents covered 200 pages. That's not what we used |Oct. 18~."
Instead, the Bank of New York wrote the terms on a personal loan form, sending the form by facsimile machine to Hussman.
On the line for description of collateral, the bank representative wrote "none."
"Walter Hussman signed the note and faxed it back," Anderson says. "The bank wired $69.3 million to Gannett on the basis of his signature. It was completely unsecured.
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|Title Annotation:||Philip S. Anderson; Nixon Hargrave Devans & Doyle; Rupert Phillips; Gerald Reilly; Arkansas Gazette newspaper|
|Date:||Oct 28, 1991|
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