Judge to Inquirer Owners: Let’s Have Us an English-Style Auction — You Have a Month

Ruling calls for partnership that owns the Inquirer, Daily News and philly.com to be dissolved, and quickly.

George Norcross (left) and Lewis Katz in court late last year. AP Photos | Matt Rourke

Inquirer ownership partners George Norcross (left) and Lewis Katz in court late last year. AP Photos | Matt Rourke

And there you have it. In a ruling issued on Friday, Vice Chancellor Donald F. Parsons of the Court of Chancery of the State of Delaware has decreed that the warring partners in Interstate General Media — the company that owns the Philadelphia Inquirer, Daily News and philly.com — will have a private auction among themselves to determine who will own the operation going forward. And that it must happen right quick:

… I will order the dissolution of IGM. In addition, I will order IGM to be sold in a private, “English-style” open ascending auction between General American and Intertrust. The minimum bid for the auction shall be set at $77 million in cash. I hereby direct General American and Intertrust promptly to confer and submit a proposed form of order implementing these rulings consistent with the other terms of the proposed private auction that were discussed at the conclusion of the evidentiary hearing and during the final argument on April 24, 2014. I further order that in no event shall the auction for IGM be held later than May 28, 2014; that is, no more than thirty calendar days from, and inclusive of, Tuesday, April 29, 2014.

So, imagine the kind of auction you see on TV: a fast-talking auctioneer and bidders who raise paddles or wink or make little shooting gestures with their hands when they hear a number they like. Now imagine that there are just two guys doing the bidding: George Norcross and Lewis Katz.


This is, of course, the option that the George Norcross ownership faction had been hoping for, while the faction led by Lewis Katz and H.F. “Gerry” Lenfest had advocated for a sealed, public auction that would have essentially put the company up for sale on the open market.

Interestingly, Parsons pointed to the Newspaper Guild of Philadelphia's loss of financial backing in its bid to enter the auction in his determination of which auction process would maximize the value of ownership interests:

I held a two-and-a-half-day evidentiary hearing in this action from April 14 to 16 that was open to the public. On the last day of the evidentiary hearing, the Guild announced that it had received indications of interest from as many as six potential financial backers and publicly identified two of those possible backers. As discussed infra, none of those potential bidders continue to be interested. The end result is that despite all the attention this matter has received, and the fact that it has been known for months that the Company is for sale, Intertrust cannot point to a single individual or entity beyond the parties to the LLC Agreement that is, at this time, interested in participating in a public auction for IGM.

Although admittedly there has been uncertainty as to what type of auction this Court would order since news of the Company’s imminent sale became public knowledge, I am unconvinced that that uncertainty has caused any potential serious bidders to avoid expressing an interest in purchasing the Company.

Essentially, Parsons is saying, it's been widely known that the company has been "in play" for some time — if anyone on the outside had had serious interest in purchasing the company, they'd have made themselves known by now.

The Norcross camp was quick to offer a statement through spokesperson Daniel Fee:

"We are pleased that Vice Chancellor Parsons has agreed that the best way to end the IGM partnership is through a members only sale process, just as the original agreement stipulated.  We are also pleased that he has agreed that the bidding process should be open and transparent and that it should be done quickly.

"Mr. Norcross looks forward to the bidding process and, if he is successful, restarting the progress the company was making before being derailed by this litigation."

All of which means we finally have an end date — May 28, 2014 — for the current spate of turmoil and tumult that started with the firing and eventual reinstatement of editor Bill Marimow. But fear not, fans of high media drama: It's also the start date of whatever the next thing will be.

Parsons's full, 42-page statement is below:

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  • matthew brandley

    Not one media news holding co ha sold for this much in the past 6 years. This left leaning Obama kissing commy driven rag would not be missed by many people if the paper where to go bankrupt believe me

  • Michael

    Norcross is going to be lethal and destroy peoples good name. Once he gets all of Philly.com, he plans to hyper link to his Patch sites he owns. These sites are failing and need a rich person. He’ll use them to further destroy and cyber harass those he seeks political retribution.

    The unfortunate fact is that online journalism can’t survive without a wealthy benefactor or cat GIFsby Mathew Ingram

    SEP. 22, 2013 – 11:56 AM PDTA

    A

    SUMMARY:

    It’s always been true to some extent, but it is even more true now — serious online journalism requires something else to subsidize it, whether it’s a rich benefactor or cat GIFs and slideshows.As the traditional media industry has struggled with the ongoing decline of its traditional business and the emergence of new competitors like The Huffington Post and BuzzFeed, a number of different business models have taken shape, from paywalls or metered subscriptions to native advertising. But it is becoming increasingly clear that journalism — which in a sense has always been a subset of media — will never be able to survive without assistance from some other entity, whether it’s a rich benefactor or a non-media business.

    In fact, there’s a case to be made that “serious” journalism has never really been able to survive on its own, but has always needed something to subsidize it. Reuters media writer Jack Shafer made that point recently in a post about how online news has never really made money — and likely never will. There is a universe of things that large quantities of people are willing to pay directly for, but the news doesn’t seem to be one of them (although some recent crowdfunded efforts are worth watching). Says Shafer:

    “Were harder forms of news ever commercial? Gerald J. Baldasty’s book, The Commercialization of News in the Nineteenth Century, makes a case clear as spring water that hard news has almost never been a mass commercial enterprise.”

    News has always been subsidized somehow

    In the good old days, the journalism business was subsidized by all of the other things a newspaper contained apart from the news. This included classified ads, obviously, but also horoscopes, gardening columns, the comic page and other add-ons that had little or nothing to do with news or journalism. Gradually the internet has taken most of these pillars away, and left newspapers with just the hard news — in other words, the only thing no one wants to pay for.

    Obviously, some media outlets charge for their news and are still in business — the Wall Street Journal, for example, or the New York Times or Financial Times. But even they are not pictures of financial health: they have all had to cut staff, and to some extent the NYT and WSJ are subsidized by the largesse of their owners, people who became wealthy back when media businesses still spun off large amounts of cash. Rupert Murdoch pays for the New York Post‘s estimated $100 million or so per year in losses, for example, even though they don’t show any signs of stopping.

    Until it was acquired by Amazon CEO Jeff Bezos, the Washington Post was subsidized not just by the Graham family, but also by the Kaplan education business (until it began to fail as well). In Canada, the largest national paper — the Globe and Mail — is owned by the Thomson family of Thomson Reuters fame, while the Toronto Star has been subsidized by both a family trust and the Harlequin romance business. The parent company of the Guardian in Britain subsidizes its journalism through a family trust but also through the ownership of the Auto Trader group of companies.

    Even online-only entities have had to find ways of subsidizing their journalism: the Huffington Post is part of the shrinking AOL empire, and until recently All Things Digital was subsidized by its parent theWall Street Journal — which both drove traffic to the site and helped sell ads on it. Now, the team behind the business has to find another large media partner to fill that role, presumably because relying on advertising alone isn’t going to pay the bills.

    Sites like BuzzFeed and Business Insider aren’t really standalone businesses either: although the former says it is profitable (a claim that remains unproven), and BI owner Henry Blodget says his site turned a small profit earlier this year, both are clearly subsidizing the serious journalism they do — BuzzFeed’s political and foreign reporting, for example — through various forms of entertainment, whether it’s cat GIFs or slideshows of beauty-contest winners. BuzzFeed is also betting heavily on the value ofsponsored content, although it’s not clear whether that will generate enough growth to support its market value.

    A wealthy benefactor or cat GIFs and slideshows?

    At this point, the options that media companies have when it comes to supporting their journalism break down into several categories:

    Find a rich benefactor: This is the road the Washington Post took by selling to Jeff Bezos, and it has been taken by others as well — including the Independent, which is owned by Alexander Lebedev, a Russian oligarch. The Boston Globe was recently acquired by billionaire hedge-fund owner John Henry.

    Ask for donations: Some sites that do valuable public and social journalism, such as ProPublica and the Texas Tribune, are based on a non-profit model that relies on charitable donations from the wealthy. This is a more established version of the Kickstarter model.

    Have another business: This is what the Post did before it sold to Bezos, and what some other publications also do. Arguably AOL and the Huffington Post fall into this category as well — and so do Bloomberg and Reuters to some extent, by selling proprietary market-moving content through their corporate terminal and subscription businesses.

    Focus on entertainment: BuzzFeed and Business Insider have clearly taken this route by using lighter content, which tends to appeal to advertisers, as a way of subsidizing their more serious journalism. But is that enough to build a sustainable business or will they also have to sell out to a larger entity eventually, as the Huffington Post did?

    All of the above: Some media companies have taken an agnostic approach to the problem, including the the Economist and Atlantic Media. The former has a valuable proprietary research arm as well as an events business (a similar model to the one Gigaom uses), while the Atlantic is owned by a wealthy benefactor but also does events, and is trying to build a digital subscription business.

    Which of these models will ultimately be more successful? That’s almost impossible to say. What seems clear is that a media entity that focuses primarily on hard news or serious journalism can no longer be viable by itself, let alone become a massively profitable business like the media giants of old. Whether that is that a good thing or a bad thing for society is a topic for another post.

  • SICK OF RACIST POLITICS

    Online Reform. Our Laws must catch up with our Technology or else we will have people like Norcross who invest tons of money into advertising to keep social media sites MISINFORMED and INACCURATE, RECKLESS EDITORS reporting what they are told to report by the POLITICAL BOSS himself.

    His days are numbered. Norcross has caused SO much damage. He needs to be exposed just like that Sterling guy from the Clippers. Norcross operates like he’s running a PLANTATION and people are SICK of him and his family and their arrogant entitlement. They need to be exposed