GRAND FORKS: Herald is Eyed Upstream
By Stephen J. Lee, Grand Forks Herald, N.D.
Mar. 31–Forum Communications in Fargo is trying to buy the Herald, its closest competitor for a century and more in eastern North Dakota.
The Herald is one of a dozen Knight Ridder newspapers that McClatchy Co. is selling off in the process of buying the 32-paper group based in San Jose, Calif.
McClatchy, also based in California, owns the Star Tribune in Minneapolis and a dozen other papers. As part of the deal to buy Knight Ridder, it is selling the Herald, the St. Paul Pioneer Press, the Duluth News Tribune and the Aberdeen American News in South Dakota, as well as eight other papers.
Forum Communications wants to buy the Knight Ridder papers in Grand Forks, Duluth and Aberdeen, according to news reports.
"We’ve let it be known that we are interested," Bill Marcil, head of family-owned Forum, told the Sacramento Bee on Wednesday.
Through a spokeswoman, Marcil said he would not comment Thursday.
Forum Communications, parent of The Forum of Fargo-Moorhead newspaper, has been aggressively buying papers in recent years, analysts said.
It owns about 30 daily and weekly newspapers in North Dakota, Minnesota and South Dakota, as well as WDAY television and radio stations in Fargo and WDAZ-TV in Grand Forks. Its four dailies in Minnesota are the Bemidji Pioneer, Worthington Daily Globe, the West Central Tribune in Willmar and the Red Wing Republican.
Its North Dakota dailies, besides The Forum, are the Jamestown Sun and the Dickinson Press. It also owns the Daily Republic in Mitchell, S.D.
Community matter
The Herald’s future is a big deal for the whole community, said Hal Gershman, president of the Grand Forks City Council and business owner in Grand Forks and Fargo.
"This is a very critical issue, not only for the employees of the Herald, but for the region," Gershman said Thursday. "You are a tremendous source of information for us and an advertising medium for us. To be able to have a company that could own this paper that understands our culture up here and some of the things we are sensitive to is very, very important."
Gershman sees Forum Communications as the best bet as a new owner for the Herald.
"I called Bill (Marcil) this morning before I did (learn of TheForum’s overture to McClatchy). He told me it was public now; they have entered the ring. I was calling to encourage him to do it," Gershman said. "It would be a wonderful opportunity for both our communities to build a bridge and have a company that is solid financially and that, I don’t believe, would come in and slash and burn."
Other newspaper companies mentioned as possible buyers of the Herald are based in other states and have reputations as cost-cutting operations, Gershman said.
His experience with Forum Communications and his impression from speaking with Marcil on Thursday is that the company is interested in the local communities where its newspapers are located, and is looking more to "fill in" than to cut back on resources, Gershman said.
Other bidders
Other bidders have shown interest in the Herald, too, said Herald Publisher and Editor Mike Jacobs, who once worked at The Forum.
"This is a very interesting development. The Forum is a good newspaper. They have been a good competitor for my whole career in Grand Forks," said Jacobs, who has been editor for 22 years and added the publisher role two years ago. "Clearly, Bill Marcil is a good businessman and runs a good, solid business. And the Herald is such a business as well."
Other interested bidders, according to news reports, include Lee Enterprises, based in Davenport, Iowa, and owner of the Bismarck Tribune, and MediaNews Group, the newspaper chain headlined by the Denver Post.
Also bidding for the Herald, the Pioneer Press and the other 10 papers for sale is the Yucaipa Cos., an investment firm run by billionaire Ron Burkle. The Newspaper Guild-CWA, a union that represents workers at most of the affected papers, is supporting and a partner in the Yucaipa bid. Next week, a union spokesman will meet with Herald employees to garner support for the plan, which would involve employees being given the opportunity to buy stock in the new company.
Pressured by a key investor last summer who was unhappy with its stock performance returning nearly 20 percent Knight Ridder put itself up for sale last fall. McClatchy announced March 13 it would buy the 32-paper chain in a deal worth $6.5 billion.
McClatchy said it would pay $4.5 billion in cash and stock, plus assume $2 billion in debt, and that it would sell 12 of the papers, in part to help finance the deal.
In St. Paul, a local investor group is bidding on the Pioneer Press.
There has been talk among local business people of trying to mount an effort to buy the Herald, but the cost and the responsibility seems too much, they say.
But news of Forum Communications being involved piqued local interest Thursday.
"I just wish there were investors here that could do it, so it would remain the Grand Forks Herald, period," said John Marshall, lawyer and owner of businesses in Grand Forks and Fargo. "Nothing against the Forum, but I like the Herald the way it is. By the same token, the Forum is a very good newspaper in Fargo."
‘Excellent fit’
The Forum newspaper has a circulation of about 51,000 on weekdays and 61,000 on Sundays, according to the Audit Bureau of Circulations, a nonprofit that monitors newspaper circulation for advertisers.
The Herald’s circulation is about 31,000 daily and 34,000 on Sundays.
The Duluth News-Tribune has a daily circulation of about 43,000, and 62,000 on Sundays. Aberdeen American News has a daily circulation of 16,000 and a Sunday circulation of 17,500.
Industry analysts say Forum Communications seems like a natural to buy the three papers.
"I know a little about the Forum from over the years. They run a pretty good little group, and Aberdeen and Grand Forks and Duluth would be an excellent fit for them," said Thomas Bolitho, of Ada, Okla., a partner in National Media Associates, which appraises and brokers newspaper deals, mostly small and midsized papers in the Midwest and South. "That is their geography, and they seem pretty comfortable with papers in that size range, so I think it would be a good fit."
John Cribb, a media broker in Bozeman, Mont., said the advantage to Forum Communications owning nearby papers in the same geographical area would be ease of management, from less travel to less of a learning curve in knowing your market and local culture. "It’s just easier to oversee than if they were scattered all over the country."
Jacobs said, "There are advantages to local ownership and there are advantages to family ownership and there are advantages to national companies and advantages to corporate ownership."
In 1997, being part of a "giant, out-of-state corporation" proved to be a godsend for the Herald, Jacobs said. "No small local company would have been able to do for the Herald and for Grand Forks what Knight Ridder did during the flood."
Knight Ridder poured thousands of dollars in aid for employees of the Herald hurt by flooding, as well as to nonprofits working in flood relief, and into renovating and expanding the Herald’s downtown building, buying a new press and installing it in a new plant in the industrial park on the west side of the city.
"One of the reasons the Herald has the outstanding physical plant, which adds considerably to its value, is that it was part of a newspaper company that had deep pockets," Jacobs said.
The sale of Knight Ridder, while portrayed gloomily in much of the media as part of ongoing consolidation in the industry that will hurt newspapers, also "demonstrates that the newspaper industry has faith in the newspaper industry," Cribb said.
Although Knight Ridder investors complained about the company’s performance on Wall Street, it’s important to put that in context, Cribb said.
The traditional returns for newspapers are 30 percent profits or higher, so 20 percent returns are seen as anemic, he said, even though such results look good in other industries.
Small daily newspapers, such as the Herald, have strong "franchises" in gathering local news, Cribb said, despite a drumbeat of pundits predicting the end of newspapers.
"In the small markets, radio and TV stations are getting the news out of the newspapers and that franchise is very strong. Content is what people want. Newspaper distribution is changing. But someone still has to originate the content and the content still has value."
Lee can be reached at (701) 780-1237, or (800) 477-6572, ext. 237; e-mail him at slee@gfherald.com.
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Copyright (c) 2006, Grand Forks Herald, N.D.
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