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U-T pension woes emerge in takeover battle

Report has L.A. Times owner jockeying to acquire San Diego daily

One of the bigger ironies to be found in the struggle over who will be next to own San Diego's daily newspaper may turn out to be the pension problem.

Ken Doctor

Not public worker pensions — which current U-T San Diego owner, Republican hotel mogul, and mega-developer Douglas Manchester takes a dim view of — but U-T employee pensions.

"While the acquisition could have closed as early as today, it’s now been held up by a familiar concern in newspaper property sales: pension obligations," says Ken Doctor in a March 3 blog post about what he reports to be a possible takeover of U-T San Diego by Tribune Publishing, the Chicago-based owner of the Los Angeles Times.

"For Tribune Publishing, spun off from Tribune Broadcasting six months ago, San Diego — California’s second largest city, and the tenth most affluent metro area in the nation, with a population of 3.2 million — would become Tribune’s ninth metro market, and a new twist to C.E.O. Jack Griffin’s clustering strategy."

Adds Doctor, ”U-T San Diego owner Doug Manchester had given Tribune Publishing a short-term exclusivity agreement, as it worked to a completed purchase agreement. That exclusivity is lapsing, as further due diligence is being done and bids reconfigured."

According to the item, "The purchase price would likely be in the range of $80-90 million, with the buyer also assuming the pension obligations of the U-T, estimated at more than $60 million."

Malin Burnham
Bill Geppert
Irwin Jacobs

Doctor's account reviews the reported Tribune bid, as well as efforts by Point Loma yachtsman and real estate mogul Malin Burnham, assisted by ex-Cox cable TV executive Bill Geppert, to take over the U-T with a nonprofit corporation, as first reported here by Don Bauder and confirmed to us by Burnham in September of last year.

"Despite the connectedness of both Burnham and Geppert, raising the rest of the money won’t be easy, as would-be benefactors look both at the tough newspaper business and those growing pension obligations. (Reportedly, recent payments against those pension liabilities have been minimal.)"

Says Doctor: "Any benefactors or buyers have to ask themselves the question of how long the operation’s approximate $20 million in annual earnings will last. As optimistic as Burnham is about reinvesting profits in local reporting resources and in community organization funding, it’s easy see how the continuing decline of metros could burst that bubble."

He notes, "Burnham’s group may or may not have a billionaire member, but could offer capacity for a purchase, and possibly for longer-term investment."

The billionaire most local observers are talking about is Qualcomm co-founder and Obama Democrat Irwin Jacobs.

Though yet to emerge from the newspaper-takeover shadows, the wealthy La Jollan has long been at political odds with Manchester, who has freely used the U-T to bash Nathan Fletcher, a Qualcomm executive and two-time candidate for mayor who enjoys the backing of Jacobs.

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One of the bigger ironies to be found in the struggle over who will be next to own San Diego's daily newspaper may turn out to be the pension problem.

Ken Doctor

Not public worker pensions — which current U-T San Diego owner, Republican hotel mogul, and mega-developer Douglas Manchester takes a dim view of — but U-T employee pensions.

"While the acquisition could have closed as early as today, it’s now been held up by a familiar concern in newspaper property sales: pension obligations," says Ken Doctor in a March 3 blog post about what he reports to be a possible takeover of U-T San Diego by Tribune Publishing, the Chicago-based owner of the Los Angeles Times.

"For Tribune Publishing, spun off from Tribune Broadcasting six months ago, San Diego — California’s second largest city, and the tenth most affluent metro area in the nation, with a population of 3.2 million — would become Tribune’s ninth metro market, and a new twist to C.E.O. Jack Griffin’s clustering strategy."

Adds Doctor, ”U-T San Diego owner Doug Manchester had given Tribune Publishing a short-term exclusivity agreement, as it worked to a completed purchase agreement. That exclusivity is lapsing, as further due diligence is being done and bids reconfigured."

According to the item, "The purchase price would likely be in the range of $80-90 million, with the buyer also assuming the pension obligations of the U-T, estimated at more than $60 million."

Malin Burnham
Bill Geppert
Irwin Jacobs

Doctor's account reviews the reported Tribune bid, as well as efforts by Point Loma yachtsman and real estate mogul Malin Burnham, assisted by ex-Cox cable TV executive Bill Geppert, to take over the U-T with a nonprofit corporation, as first reported here by Don Bauder and confirmed to us by Burnham in September of last year.

"Despite the connectedness of both Burnham and Geppert, raising the rest of the money won’t be easy, as would-be benefactors look both at the tough newspaper business and those growing pension obligations. (Reportedly, recent payments against those pension liabilities have been minimal.)"

Says Doctor: "Any benefactors or buyers have to ask themselves the question of how long the operation’s approximate $20 million in annual earnings will last. As optimistic as Burnham is about reinvesting profits in local reporting resources and in community organization funding, it’s easy see how the continuing decline of metros could burst that bubble."

He notes, "Burnham’s group may or may not have a billionaire member, but could offer capacity for a purchase, and possibly for longer-term investment."

The billionaire most local observers are talking about is Qualcomm co-founder and Obama Democrat Irwin Jacobs.

Though yet to emerge from the newspaper-takeover shadows, the wealthy La Jollan has long been at political odds with Manchester, who has freely used the U-T to bash Nathan Fletcher, a Qualcomm executive and two-time candidate for mayor who enjoys the backing of Jacobs.

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1

This seems very odd. Until just a few years ago, the U-T and most of its big-city brethren were highly valued because they were highly profitable. We all know of the ills that have befallen newspapers in recent times of declining circulation and resulting decline of ad revenues (also the loss of classified advertising to Craig's List.) But while under Copley ownership, I would have expected the paper to have been making the necessary contributions to its pension trust to keep it on solid footing. After all, the governing law, known as ERISA (Employee Retirement Income Security Act) had requirements in place to prevent gross underfunding of such plans, and this paper was surely covered by ERISA. We all know that ERISA, rather then encouraging better pension plans in the private sector has resulted in most employers eliminating them, or never starting them in the first place. So, ERISA hasn't accomplished what it was intended to do. Yet, a $60 million deficit at the now-diminished U-T is hard to swallow. Was the pension plan fully funded when Copley sold the paper?

March 4, 2015

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