Founders' children to retain majority control of company.
In a deal that will help to finance the inter-family transfer of Creative Loafing Inc., media giant Cox Enterprises will receive a 25 percent stake in the Atlanta-based alternative newspaper chain, it was announced today.
The three majority owners, Deborah Eason and her husband Elton — who founded Creative Loafing in 1972 as an arts and entertainment paper — along with longtime co-publisher Scott Walsey, have agreed to sell their controlling interest to a group led by the Easons’ son, Ben Eason, and their two daughters, Jenny and Taylor Eason. The three veteran owners, along with a handful of other investors, will retain a small share of the company.
Negotiations were in full-swing last July, when the Easons announced that they had set in motion a plan that would allow their children to take control of the company. But news that Cox was involved in the negotiations wasn’t announced until Wednesday, when both the flagship Creative Loafing paper and the Cox-owned Atlanta Journal-Constitution published articles about the pending deal. In both reports, executives declined to say how much money is at stake.
Each paper also reported the executives’ assertions that advertising would remain competitive in Atlanta despite Cox’s already-dominant position in the market. In addition to the city’s only daily, Cox owns the local ABC-TV affiliate as well as the major news-talk radio station.
Ben Eason said Creative Loafing-Atlanta will continue to serve as a media critic of the larger Journal-Constitution despite the investment, which gives Cox two seats on Creative Loafing’s eight-member board. In fact, Eason said, Creative Loafing might even turn up the heat in its coverage of the daily to prove its independence.
“They’re a minority investor in this,” Eason said. “That doesn’t give them any rights to do anything but make money off the deal… Creative Loafing is the watchdog of the Atlanta Journal-Constitution. If we don’t perform that duty, our paper’s going to suffer.”
Eason said he talked to several venture capital firms before reaching an agreement with Cox, whose investment will be used to finance the transaction with his parents as well as future deals. For strategic reasons he opted for the deal with Cox, which has been printing Creative Loafing for seven years.
“I just think (my) preference … is really to be involved with someone who knows media,” Eason said. “It’s not mom-and-pop money anymore.”
The sale is expected to close tomorrow, he said.
In a telephone interview Wednesday morning, a disappointed Deborah Eason said it was not her decision to sell the chain to her children. Eason said her husband — who, like her, holds 40 percent of the shares of Creative Loafing, Inc. — and Walsey, with 15 percent ownership, banned together against her. Any two of the majority owners could overrule the third, Ms. Eason said, and she had no choice but to agree to the sale.
“I’m getting kicked out,” she said, noting that her son is negotiating the sale.
“It’s a family thing,” Ben Eason said in response to his mother’s comments. “Her issue relates to how she and her other shareholders all wanted to do other things with the company. The only way to satisfy them was to sell it to the kids or sell it on the open market.”
“I think my mom’s preference would be to run it until she’s 110,” he added.
Ms. Eason hasn’t relinquished control of everything. She will retain a portion of the chain’s Internet assets as well as ownership of Creative Loafing-Savannah, 49 percent of which she plans to sell to the paper’s employees. She also will use money from the sale to start the Creative Loafing Foundation, which will provide college scholarships to underprivileged children in the cities where Creative Loafing publishes.
Despite her initial objections, Eason has come to terms with the deal. “I’m fine with [the sale],” Eason said. “I’m passionate about the Internet. … I really have so much to look forward to, you know.”
Much has changed since Ms. Eason started the chain’s flagship paper 28 years ago in her living room. The Atlanta paper is the second most widely-distributed newspaper in Georgia, with a weekly circulation of 124,000. Meanwhile, Creative Loafing, Inc. is the third largest alternative-newspaper chain behind New Times Inc. and Village Voice Media. According to the report published today in Creative Loafing-Atlanta, the company generates annual revenue of about $20 million.
In addition to the Atlanta paper, the company publishes the AAN-member Creative Loafing-Charlotte, and recently purchased a minority interest in Birmingham Weekly. The firm also owns non-member alternative newsweeklies in North Carolina (The Spectator in Raleigh-Durham) and South Carolina (Creative Loafing-Greenville); suburban weeklies (Topside Loaf and Gwinnett Loaf); a weekly Atlanta nightlife guide (The Scene); and a monthly Nascar publication (Motorsport America).
Ben Eason owns two alternative weeklies in Florida, the AAN-member Weekly Planet in Tampa, and the non-member Weekly Planet of Sarasota, both of which will join Creative Loafing Inc. when the deal closes. It will be a return to the fold for the Tampa paper, which was launched by Creative Loafing Inc. in 1988 before it was purchased by Mr. Eason in 1993. It is now the third largest paper, and the largest alternative weekly, in the Tampa Bay area.
Mr. Eason acquired the Sarasota paper in 1998; it made the transition from monthly to weekly distribution in June.
Cox Enterprises is a $6 billion company with wide-ranging media interests, including 17 daily papers and almost two dozen weeklies in North Carolina and Ohio. The company also owns 67 percent of Cox Communications, Inc., a publicly-traded firm with a large portfolio of cable television and Internet properties.