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Tom Gores, head of Beverly Hills-based Platinum Equity, the private equity group that bought the Union-Tribune last year, says this month in a question-and-answer session on the company's website that the U-T in certain areas "was a bit fat, so we've made the paper more efficient in terms of head count." (There have been massive layoffs under Platinum, as there had been earlier under Copley management.) "We were able to buy it at a reasonable value," says Gores. (I have said all along that Platinum paid $52 million for roughly $100 million worth of real estate; the newspaper came with the deal. However, a terrible commercial real estate market has frustrated the firm's ability to dump the assets.)

Gores's statements in the Q and A are basically the same he gave the magazine Mergers & Acquisitions last April. In that interview, Gores was critical of prior Copley management, saying it had not addressed fixed costs that were "pretty high...We knew that advertising revenues were falling, but we saw an opportunity to attack the fixed costs and adjust the company to survive on a realistic assessment of both advertising and subscription revenue." He told Mergers & Acquisitions, "We put in new management and got the fundamentals in order...We could make a difference operationally in a way the old owners hadn't tried." In that interview, he said that one challenge is to get readers to pay for online content. But in all likelihood, it will be a bigger media company that will figure out how to do that. In that interview, he also mentioned that Platinum got the U-T "at a fair price." In both the online and Mergers & Acquisitions interview, he refers to the U-T as "the Tribune," but in the M&A interview he also calls it by its correct name.

Thanks to Matt Potter for providing the Mergers & Acquisitions interview.

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Comments

David Dodd Aug. 11, 2010 @ 8:45 a.m.

Or, perhaps, in order to raise revenue they will simply run more stories like this:

http://www.signonsandiego.com/news/2010/aug/10/q-chris-haines-pulte-homes/

I have to wonder how much Pulte paid to have those softballs lobbed their way. It's ridiculous.

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Don Bauder Aug. 11, 2010 @ 9:58 a.m.

Response to post #1: It doesn't appear to be a kept story (one influenced, but not paid for, by advertisers) but it is certainly one that could bear the name of the famous stripper, Rosie Senario. Best, Don Bauder

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Visduh Aug. 11, 2010 @ 10:04 a.m.

Do I have this right? The paper had been shrinking its staff for a number of years and news reporting was suffering. So, that meant that when Platinum bought it, it had TOO MANY people in some areas, notably the newsroom, and it cut further. Also, the new regime went after "fixed costs", and reduced them. Odd, but I thought "fixed" meant they were set and hard to alter without radical steps and the passage of time. I guess my definition of "fixed" being forty years out-of-date, the one I learned while earning my MBA, is 'way too limited.

The Light News has been scooped any number of times on local, North County stories by the North County Times. That paper is no exemplar of quality journalism. In recent days it has beaten the U-T in reports on the Frank Lopez (Vista city councilman, restaurateur and gambler extraordinaire) scandal by about two days. One can only assume that some reporter at Light News is assigned to read the competitor's product and then write stories that seem worth repeating.

It is nice to know that the new owner now at least knows the name of the paper he bought.

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Don Bauder Aug. 11, 2010 @ 11:25 a.m.

Response to post #3: I retired in March of 2003 and had thought throughout my 30 years there that the place was overstaffed. So it could initially absorb the Copley cuts. However, finally, the cuts under Copley got severe and greatly affected the quality of the product. Then Platinum came in and cut even more severely -- right into the bone. Also, it added responsibilities to the often-lower-paid reporters remaining: they must feed the online edition, Twitter, etc. as well as write stories for the morning paper. This is clearly reflected in the product. Is it a death spiral? It's too soon to say. Best, Don Bauder

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David Dodd Aug. 11, 2010 @ 6:52 p.m.

@ #2: Pulte advertises in the U-T. The questions seem pre-planned, and the answers are canned corn. For example, the remark about the Poway School District being desireable? Only today was the district "pleased to announce" that they wouldn't be cancelling school bus service after all, as they had stated earlier that all bus services would no longer be available. I wouldn't desire to enroll my child in a school district like that.

131 units doesn't seem like much, but when there have been so many foreclosures in the last couple of years, it seems unlikely that "new" is going to sell any more than "used" and "cheaper".

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Don Bauder Aug. 11, 2010 @ 7:45 p.m.

Response to post #5: I agree that much tougher questions should have been posed. It did look like the questions and answers could have been pre-planned. It may have been a kept story, but if so, the disguise was at least moderately good. Remember, in most kept stories, an ad salesman doesn't come to a reporter or an editor and say, "This is an advertiser; do a puff job." The communication is more subtle, usually unspoken. Best, Don Bauder

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Visduh Aug. 11, 2010 @ 7:55 p.m.

Refried, if you would not want to enroll your kid in a school district that didn't bus the kid to school, you would look long and hard here in SD County. Most of the districts have sharply cut busing, and some have virtually eliminated it except for those kids who must be transported per state law, such as special ed. Busing for high school kids is but a quaint memory nearly everywhere, and middle school buses are not far behind. Now even buses for the primary grades are on the block in most districts. Want to see traffic gridlock? Just visit a school that was designed to handle a few buses and look at the mess created by hundreds of cars lined up in the nearby streets. The fact that Poway is still going to have buses is a credit to the district and the parents.

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David Dodd Aug. 11, 2010 @ 8:09 p.m.

Visduh, it isn't really the cancellation of busses that bothers me, it's the poor spending of school funding and the stupid and hasty decisions that are sometimes made. In Mexico, there have never been school busses, and everything here works wonderfully well without them. When my kids were young, I worked and the wife stayed home and wolked the kids to school, and in odd moments when she worked and I was temporarily unemployed, I took the kids to school. When they got older, we gave them bus or taxi money. No complaints.

But it has been historically different in the U.S. For high school students, the lack of bussing is completely understandable in my opinion, but Poway was going to rake all bussing off of the table, even for elementary schools. You know, that's a very rural area, some of it, I can't imagine a seven-year old walking five miles to school. People in the U.S. simply pay too many taxes without much accountability to where that money goes. I don't blame the Poway School District so much as I wonder about Pulte touting that district as any more attractive than anywhere else.

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Burwell Aug. 11, 2010 @ 10:11 p.m.

Odd, but I thought "fixed" meant they were set and hard to alter without radical steps and the passage of time. I guess my definition of "fixed" being forty years out-of-date, the one I learned while earning my MBA, is 'way too limited.

Platinum appears to have acquired the U-T in a Leveraged Buy-Out (LBO) transaction. This means the $50 million Platinum borrowed to buy the U-T was probably transferred to the U-T's balance sheet. So Platinum has to wring fat out of the U-T's income statement and generate extra profits to pay interest and principal on the loan. Platinum likely has a lot of overhead at the head office to absorb, so it probably siphons a couple million in management fees out of the U-T each year. So more costs have to be cut to free up cash. The U-T layoffs were not necessarily driven by the collapse of the economy. LBOs are a cancer on the economy and should have been outlawed years ago.

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Don Bauder Aug. 12, 2010 @ 7:07 a.m.

Response to post #7: Buses are only part of the problem. San Diego education began to disintegrate when music education was dropped -- back in the 1970s, I believe. Remember when Alan Bersin, superintendent, was an enthusiastic backer of the ballpark redevelopment project even though it would take money from the schools? Best, Don Bauder

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Don Bauder Aug. 12, 2010 @ 7:11 a.m.

Response to post #8: There is no lack of bussing among high school kids. Like of busing, yes. Best, Don Bauder

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Don Bauder Aug. 12, 2010 @ 7:17 a.m.

Response to post #9: We do know that Platinum has put debt on U-T properties. We reported that in the Reader some time ago. In the normal leveraged buyout, the buyer takes huge dividends for itself and piles debt on the company. The company re-emerges much weaker than it was before the LBO. I agree with you: LBOs should be abolished. I'll go a step further: some of the practitioners belong in prison. But they won't go there, because they are some of New York's most honored citizens. I've written a lot about this through the years. Best, Don Bauder

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Visduh Aug. 12, 2010 @ 9:19 a.m.

Response to post #8:

Developers can really benefit from having their cookie-cutter developments in areas with "good schools." The real estate agents will always tout the quality of the local schools. Seldom is there any firm evidence that the schools are run better in such areas than those in less-favored areas. In San Diego County there are a few favored areas for school quality. The north county coast is one of those, as is Poway. Parents who care about the educational experience their kids will have tend to flock to those areas, thus home prices are higher. When kids from higher-income families attend school, their test scores are higher, and the scores are very highly correlated to family income. So, which comes first, the "quality" as measured in test scores, or the income of the families?

It has always amused me that people living in the Escondido area and whose kids attend San Pasqual High will always brag about that school. The student population is richer and whiter than at the other two district high schools, and their sports program has a few standouts. But it is really just another suburban high school, staffed and run just about the same as its sister schools. From personal observation, the attitudes of the staff and students are not anything to brag about. But you can bet that any house in that attendance area will sell for a higher price and get more attention than a home on, say, the north side of Escondido.

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Don Bauder Aug. 12, 2010 @ 11:42 a.m.

Response to post #13: That makes three of us wanting LBOs abolished. Best, Don Bauder

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Don Bauder Aug. 12, 2010 @ 11:55 a.m.

Response to post #14: Look at the big picture, though: even after a drop of 35%, San Diego home prices are among the highest in the nation. But few would say that San Diego schools stand out. Yes, home prices are correlated to some degree with quality education. But not that much. In San Diego, weather trumps education by a great deal. Best, Don Bauder

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David Dodd Aug. 12, 2010 @ 1:48 p.m.

@ #8, #14: Well, in an odd yet fascinating turn of events, it looks like I'm going to get to examine the current state of San Diego education for one school year. My youngest apparently will complete her senior year of high school over there. My guess is that her mathematics, chemistry, physics and other sciences are probably beyond the average over there, her English (though perfectly spoken) might be a tad below (English spelling is insane compared to Spanish), and her only lessons in American civics and history have come from yours truly. The latter could present a potential problem ;)

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Don Bauder Aug. 12, 2010 @ 5:03 p.m.

Response to post #17: Congratulations to you and your daughter. Best, Don Bauder

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David Dodd Aug. 12, 2010 @ 5:43 p.m.

Thanks, Don. But hold on the congrats, I have yet to discover what they'll teach my pride and joy about American History. They taught us in grade school that George Washington chopped down a cherry tree only to admit it to his father afterward. Later in life we find out there was no axe, no cherry tree. Imagine my disappointment.

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Don Bauder Aug. 12, 2010 @ 9:39 p.m.

Response to post #19: It was disappointing to find out later in life that Ben Franklin was an incurable womanizer, too. Best, Don Bauder

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David Dodd Aug. 12, 2010 @ 10:04 p.m.

Response to #20: My understanding is that Franklin was also a great writer of, well, at the time they called it pornagraphy. Of course, these days it is nothing more than your average romance novel. Must've been all of that time he spent in France ;)

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Visduh Aug. 12, 2010 @ 10:42 p.m.

Franklin was a wonder. Scientist, philosopher, inventor and pundit. He once said that "Beer is proof that God loves us and wants us to be happy." How can you argue with that?

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Don Bauder Aug. 13, 2010 @ 6:30 a.m.

Response to post #21: I recall that while he was in France, a jealous husband gave his wife, one of Franklin's lovers, a chamber pot with a picture of Ben in the bottom. Best, Don Bauder

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Don Bauder Aug. 13, 2010 @ 6:32 a.m.

Response to post #22: I believe it was Franklin who said older women were the best mistresses because they were so grateful. Best, Don Bauder

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Don Bauder Aug. 13, 2010 @ 6:38 a.m.

Response to post #23: This is a story about Ben -- made up about 200 years after his death. In his attempt to discover electricity, he is flying a kite. It is not working well. His wife says, "You need a tail." Ben says to himself, "Just like a woman. When I tell her I want a little tail, she says, 'Go fly a kite.'" Best, Don Bauder

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David Dodd Aug. 13, 2010 @ 6:55 a.m.

Response to #26: Ha! I much prefer that one to the chopping down of the cherry tree by Washington! And, obviously, there's a tad more truth in that kite story than in the cherry tree tale ;)

Of course, there is a great economics lesson that should also be passed on:

A man is getting into the shower just as his wife is finishing up her shower, when the doorbell rings. The wife quickly wraps herself in a towel and runs downstairs. When she opens the door, there stands Bob, the next-door neighbor.

Before she says a word, Bob says, "I'll give you $800 to drop that towel."

After thinking for a moment, the woman drops her towel and stands naked in front of Bob, and after a few seconds, Bob hands her $800 and leaves. The woman wraps back up in the towel and goes back upstairs. When she gets to the bathroom, her husband asks, "Who was that?"

"It was Bob the next door neighbor," she replies.

"Great," the husband says, "did he say anything about the $800 he owes me?"

Moral of the story: If you share critical information pertaining to credit and risk with your shareholders in time, you may be in a position to prevent avoidable exposure.

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Don Bauder Aug. 13, 2010 @ 9:35 a.m.

Response to post #27: Tell it to Hewlett-Packard. Best, Don Bauder

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