The stunning plunge in the value of the Philadelphia Inquirer and its sister properties reflects not only the continuing contraction of the publishing business but also provides a rare glimpse into how badly newspapers have fallen out of favor among investors.
A decade or so ago, the Inky and the Philadelphia Daily News, its feisty tabloid sibling, would have been worth the batter part of a billion dollars in the unlikely event that their then-owner, Knight Ridder Inc., were willing to part with them.
On Monday, the papers – along with their companion website Philly.Com – were sold to a group of Philadelphia businessmen for $55 million, according to the Inky.
The new buyers will be the third owners of the Philly media group since the various assets of KRI were sold in 2006 at the prompting of activist shareholders who presciently thought it was a good time to exit the newspaper business.
The first buyer of the Philly papers was the McClatchy Co., which bought the entire Knight Ridder chain for $4.4 billion but then elected to sell the Philly papers (and certain other titles) without ever taking possession of them.
McClatchy flipped the Philly properties to Brian Tierney, a peripatetic public relations man who assembled a group of Philadelphia investors to pay $515 million for the publishing group.
As both the economy and newspaper ad sales tanked in the ensuring years, Tierney & Co. were forced into bankruptcy in 2009 when they could not keep up with the interest payments on more than $300 in debt they had borrowed to finance the acquisition.
The rights of Tierney’s unpaid creditors were acquired by Alden Capital Management and Angelo, Gordon & Co., two financial firms who specialize in buying distressed debt for pennies on the dollar to gain control of beleaguered companies that they then fix and sell to a new buyer at a profit.
After an extended tussle with Tierney, who tried to buy the company out of bankruptcy with an alternative bid, the distressed-debt investors won control of the Philly papers in 2010 by paying $139 million.
The fix-up planned by the investment firms fizzled, owing to continuously falling ad sales and stubbornly high operating costs that include a batch of hard-to-change legacy union contacts.
The frustrated owners earlier this year put the company up for sale, paving the way for the transaction Monday that put the value of these iconic newspapers at a fraction of what they were worth just six years ago.