Art Howe Unable to Arrange Financing in Time; Baltimore City Paper Owner Times Shamrock Moves In to Ink Deal.
In a surprising reversal, Alternative Media Inc. [AMI] announced yesterday that its three papers would be sold to the Scranton, Pa.-based Times Shamrock Group, parent company of AAN member Baltimore City Paper.
Yesterday’s disclosure comes just six weeks after AMI announced that the San Antonio Current, Orlando Weekly and Detroit Metro Times had been sold to Art Howe, president and publisher of Ft. Washington, Pa.-based Montgomery Newspapers and owner of AAN member Philadelphia City Paper. Howe had emerged as the winner in a private auction of the AMI papers when he outbid the field by agreeing to pay a reported $21 million.
According to AMI President and CEO Ron Williams, the sale to Times Shamrock was arranged when it became clear that Howe would be unable to raise the necessary funds to pay for the papers, which collectively generate an estimated $15 million in annual revenue.
AMI officials said they expect the Times Shamrock deal to be finalized quickly. A Jan. 31 closing date has been set.
Financial terms of the deal were not revealed. However, one source familiar with the sale tells AAN News: “[The price Times Shamrock is paying] has not moved any amount that matters. It’s within $100,000 of what Howe had agreed to pay. The biggest difference with this deal from the first one is [Times Shamrock] can just write a check.”
Says Williams: “When our letter of intent [with Howe] expired [on Dec. 14], that freed us up to talk to other people.
“We like Art, we respect Art and we’re disappointed that the deal won’t go forward. You have to remember, Art was forming a new company, assembling a new structure — apart from Montgomery Newspapers — to finance the purchase. I think what happened is he underestimated how complicated the deal might be [to come up with the necessary financing].”
According to Howe, the deal collapsed under the weight of time constraints, not because he couldn’t come up with the financing.
“What happened,” he says, “was Ron and Laura imposed a severe deadline [Dec. 14] and we couldn’t make the deal work by that date. There was never a question of whether there was financing. It was a timing issue. Nothing more.”
In the weeks following the expiration of the letter of intent, says Williams, Howe said he would need more time to cobble together an investment group. Howe also told Wiliams that he thought the deal could be completed sometime this spring.
“But we decided we couldn’t wait that long,” says Williams. “It was our judgment that to drag this out into the spring — with all the uncertainty — could potentially be damaging and hurtful to the properties and to our employees. That’s when we moved in to sign the purchase agreement with Times Shamrock.”
Times Shamrock is a 125-year-old publishing and broadcasting company, owned by the Lynett family. Among Times Shamrock’s holdings are nine radio stations and four daily newspapers.
According to Baltimore City Paper Publisher Don Farley, AMI’s three papers will become part of Times Shamrock’s alternative newsweekly division. Farley says he plans to oversee the entire alternative division from his Baltimore office.
Because the Times Shamrock Group also owns daily papers, its acquisition of AMI raises the specter of AAN’s so-called Daily Paper Clause. That section of the organization’s bylaws prevents a paper from becoming a member of the association if it is owned by a company that also owns daily papers.
When the Daily Paper Clause was enacted at the AAN convention in Seattle in 1992, it included a “grandfather clause” that specifically exempted the Baltimore City Paper — the only AAN paper then owned by a daily — from the bylaws change.
AAN President Albie Del Favero says that the issue very likely will be raised at the next AAN Board meeting, to be held at AAN West later this month.