Martha’s Vineyard Gazette sold to KKR co-founder Kohlberg
I’ve always been thankful that my grandparents were good at playing the real estate game. Among their unlikely coups was buying a house in the 1960′s in Edgartown, the tony enclave on the island of Martha’s Vineyard, whose exclusive address had no correspondence to their income level. If they hadn’t bought it, there’s no way that my journalist’s salary would have been able to scoop up property like that. In the more than three decades that I’ve been going there, I’ve become a regular reader of the Martha’s Vineyard Gazette, the enormous broadsheet newspaper that has resisted the cost-cutting size reductions that many other newspapers in the United States have sustained.
That allegiance to the paper (and its weekly competitor, the Martha’s Vineyard Times), as well as my continuing nostalgia for my former media beat — the future of newspapers, publishing and journalism — made it all the more interesting when I read on Friday that the Reston family is selling the 164-year-old paper to Jerome Kohlberg. It’s the story that has it all for a business reader, really: Daily paper, read by rich and powerful residents who are captains of the financial world (and hopefully Reuters clients), sold to a true bigwig of the private equity world, and a strange connection to The New York Times to boot.
Richard Reston took over editing and publishing the paper, as the Times’s Jacques Steinberg relates in this 2003 story, after leaving the Los Angeles Times where he was a foreign correspondent with stints in Northern Ireland, the Soviet Union and Vietnam. His family has owned the paper since 1968, as the Vineyard Gazette reports here, when the late James “Scotty” Restonbought it from Henry Beetle Hough. Scotty Reston, of course, was a top editor at The New York Times for many years. ((In a bit of Vineyard cultural trivia, the Gazette has long been seen as the newspaper of the tourists and the seasonal visitors, while many year-round islanders favor the Times).
What strikes me as odd is the choice of buyer: Jerome Kohlberg, who co-founded the private equity firm Kohlberg Kravis Roberts, has another connection, once-removed, to The New York Times. Kohlberg’s son was nominated to that company’s board by Phil Falcone, the hedge fund manager at Harbinger Capital Partnerswho amassed a half-billion dollar’s worth of New York Times shares in a bid to shake up the company’s management and operations. Ultimately, Kohlberg’s son James did get nominated to the board, but Harbinger’s bet on the Times did not work out. The stock price tanked after Falcone’s move, and Harbinger since then has reduced its stake from about 20 percent to, as of this week, just above 2 percent. Kohlberg is still on the board, though Scott Galloway, the investor who came up with the Harbinger plan, has moved on.
Jerome Kohlberg is 85 and has been visiting the island from his Mount Kisco, New York home since 1943. He also appears to be taking a more friendly approach to his foray into newspapering. Here’s an excerpt from the press release:
In a separate transaction, a gift has been made to Martha’s Vineyard Preservation Trust from a fund established by the Kohlbergs, to buy and preserve the Revolutionary War-era Gazette building and property on South Summer Street in downtown Edgartown. The Trust is a non-profit organization dedicated to preserving and managing island landmarks. It is anticipated that the newspaper will continue to operate from the historic building under a lease to be negotiated with the Trust.
And as the Vineyard Gazette reports, the Trust will get $1.5 million. As for the paper and the real estate, that will cost $3.5 million. Maybe hostile takeovers don’t necessarily run in the Kohlberg family.
from DealZone:
Facebook is more than just a pretty face
The social networking website of Mark Zuckerberg (pictured) is now worth $23 billion, close to the value of online shopping website Ebay, based on the price of a recent stock purchase by private equity firm Elevation Partners. Elevation purchased $120 million in Facebook stock from private shareholders, valuing the company at $23 billion, a person familiar with the matter told Reuters on Monday.
A valuation of that amount makes Facebook larger than Yahoo, which has a market capitalisation of $20 billion, and edging closer to the size of Ebay, at $27 billion. Still, it is a fraction the size of Google ($150 billion). Facebook's backers include Digital Sky Technologies, Microsoft Corp Corp, Hong Kong tycoon Li Ka-shing and venture capital firms Accel Partners, Greylock Partners and Meritech Capital Partners.
Apple pipeline to private equity firm continues to flow
Elevation Partners, a $1.9 billion Silicon Valley private equity firm, on Tuesday welcomed former Apple executive Avie Tevanian as a new managing director. The announcement provided just the latest link in a three-way chain connecting Elevation, Apple and smartphone maker Palm.
Tevanian — who was formerly chief software technology officer at Apple — joins ex-Apple CFO Fred Anderson at Elevation, a firm Anderson co-founded (along with U2 frontman Bono, among others).
Elevation is of course a big shareholder in Apple rival Palm, which has had something of an antagonistic relationship with the iPhone maker. Palm itself counts ex-Apple execs among its ranks, including CEO Jon Rubinstein and senior vice president of product development Mike Bell.
“Avie and I worked closely together at Apple for many years and I have always admired his engineering talent and leadership, his strategic vision for how software can transform businesses and his ability to execute on that vision,” Anderson said in a press release announcing Tevanian’s arrival at Elevation.
Tevanian spent nearly a decade at Apple (he also worked at NeXT Computer, the outfit Steve Jobs founded in the mid 1980s after his estrangement from Apple). At Apple, Tevanian led the software team that developed the OS X operating system.
Palm is still working through a bumpy turnaround effort, with its hopes pinned on the success of its Pre and Pixi smartphones.
(Photo courtesy of SFGate)
from DealZone:
Xerox-ACS: the backstory
Xerox, which said early Monday morning it will buy Affiliated Computer Services for $6.4 billion, has had its eye on the IT services company for at least two years, but talks only began toward the end of the first quarter of 2009, several people familiar with the matter told Dealzone. Blackstone, which advised Xerox, worked with the company on this over the past 18 months, in addition to making the introductions earlier this year, according to one source.
Talks grew hot and heavy over the summer, especially as the credit market conditions improved, a second source said. Xerox has committed financing of $3 billion for this deal, which is being arranged by JPMorgan, so the deal only began to look like a real possibility once the financing side was sorted out.
ACS, which competes with other technology services providers such as Computer Sciences Corp and Accenture, is an attractive company because of its recurring revenue business model. It's been an especially alluring target for private equity buyers, with Cerberus having offered to buy it for $62 a share in 2007. Cerberus withdrew its offer citing the credit crunch and ACS management's refusal to engage with them. TPG was also interested in ACS about five years ago, the second source added.
Buyout firms didn't lose the opportunity to sniff around at ACS this time around either, the sources said, although it's not clear if the ACS management asked its bankers to run a formal sale auction.
"Every PE firm in the world that could raise the debt was kicking the tires on this one because of the cash," said the third source.
So after doing the M&A dance for months, why did the companies rush to announce the deal on Yom Kippur, the Jewish holiday? Apparently, word got around on Sunday that Xerox was preparing a significant announcement, and some reporters were tipped off about it, two of the sources told Dealzone. But the board only ended up meeting late at night to approve the deal, and so it was considered "safe" to hold on to the announcement overnight, but not through all of Monday!
Update: From my colleague Franklin Paul, who said Xerox CEO Ursula Burns apologized to the audience on the ACS deal call "for our need to do this announcement on Yom Kippur." "It was certainly not our intention," Burns said, but they wanted to seal the deal before it began leaking. Certainly they did, given that Xerox has coveted ACS for a long time and probably would have hated to see the deal botched by rumors before the two sides signed on the dotted line.
MGM to remain independent no longer?
What’s going to happen to MGM?
On Tuesday, the Hollywood studio announced it was replacing its chief executive Harry Sloan with a team that includes a turnaround expert. It’s a well-known fact that MGM, which is owned by private equity firms and Comcast, has struggled with a massive debt load. It has payments due on $3.7 billion of debt and the future isn’t looking too good, given the down market and shrinking DVD demand.
Media and entertainment industry analysts believe MGM won’t last much longer as an independent studio, according to a story in the Los Angeles Times:
Most industry watchers believe that MGM will not survive much longer as an independent studio and is likely to be sold to a bigger media company such as Time Warner Inc. or merged with another movie and TV studio like Lions Gate Entertainment Corp. Qualia Capital, a private investment firm headed by Amir Malin and Ken Schapiro, is actively looking at MGM, said a person with knowledge of the situation.
Who else could be a buyer? There were rumors earlier that investor Carl Icahn, who is a major shareholder in Lions Gate, was buying up MGM’s debt in the open market with the intention of forcing a merger between the two studios.
Then, there’s Comcast, which already owns a stake in MGM and could potentially be interested in owning MGM’s rich content librabry, which includes the James Bond films. Reuters’ Yinka Adegoke recently wrote that investors worry that Comcast will make a splashy acquisition soon. Could this be it?
Keep an eye on:
You misspelled library. librabry is not a word.
What’s hot (and what’s not) in media – study
Veronis Suhler Stevenson is offering a look into its crystal ball.
The private equity firm, a leading one in the media and communications business, came out today with its 2003-2013 forecast, which essentially says the global recession will speed up needed changes in the media world. In other words, things like branded entertainment and mobile advertising are going to get even hotter, even faster.
And things like newspapers, radio, and yellow pages? Well, don’t ask.
Jim Rutherfurd, Executive Vice President and Managing Director at VSS, summed it up like this in a prepared statement: “The prolonged economic downturn has accelerated changes already underway in the communications industry. Notwithstanding significant declines in traditional media, the industry taken as a whole will continue to show relatively solid performance compared to the overall economy.”
Here’s a quick hit of some key takeaways from the VSS study:
- Total communications spending will decline 1 percent in 2009 to $882.6 billion.
- However, total communications spending will grow 3.6 percent per year over the next five years to $1 trillion.
Word of mouth marketing is indeed looking good.According to PQ media Word of mouth marketing report, brands all across have increased spending on WOMM which reached $1.54 billion in 2008. As an online marketer it’s quite encoraging to know that overall communication industry has shown a solid performance, despite the economic slowdown.
Cheers!
Paul Allen’s Charter might not be Paul Allen’s after all
Paul Allen, the billionaire who made his money as co-founder of Microsoft, might no longer be the largest individual owner of cable company Charter Communications after it emerges from bankruptcy by April 1.
According to a story broken by Reuters on Thursday private equity firm Apollo Group is planning to take economic ownership of Charter. Allen will retain a 35 percent voting control as had previously been announced.
Under Allen’s watch as chairman, Charter spent billions of dollars acquiring smaller cable systems across the United States, running up a pile of crippling debt in the process. That debt load led to the company announcing last month that it has agreed a pre-packaged bankruptcy deal with senior creditors which will be filed any day now.
Allen has a spotty track record with his many investments, which range from middling NBA basketball team Portland Trail Blazers to online retailer Value America. But as this AP profile piece notes Charter may be his biggest disappointment.
Keep an eye on:
- Blockbuster swung to fourth-quarter net loss due to a writedown (WSJ)
- Apple iTunes offers feature films in HD (Hollywood Reporter/Reuters)
- Samsung launches movies to mobiles service (Reuters)
(Photo: Reuters)
Private equity publicly disses newspapers
When it comes to newspapers, there’s nothing like the thrill of defeat. Scott Sperling, co-president of private equity firm Thomas H. Lee Partners, sounded anything but disappointed on stage Tuesday at the Dow Jones Media and Money conference when he told Wall Street Journal reporter Peter Lattman about dropping out of the bid for the Knight Ridder newspaper chain in 2006.
THL avoided the newspaper beat early on, Sperling said, after deciding that newspapers were just too expensive. “We looked at Knight Ridder more recently,” he said. “But we weren’t able to approach the price.”
So what does he think of the amazing advertising revenue plunge that has smacked newspaper publishers silly since then? “I would have predicted a lesser decline than what we’ve seen… We were probably too kind in our assessment of the industry three years ago.”
To drive home the point, Sperling told Lattman about reading the Journal on its website.
Lattman: You read the hard copy too, I hope?
Sperling: [pause] Sometimes.
[cue audience laughter]
