The man who lied to Worcester

SHORTLY AFTER BUYING the Boston Globe last year, John Henry wrote a 3,000-word essay for the newspaper explaining why he bought it. The purchase wasn’t about profits, Henry explained, it was about finding a way to sustain the newspaper for the long run. The Globe, he said, is the eyes and ears of the region and, in some ways, its heartbeat. Henry vowed that the newspaper, which had been on a long decline under the New York Times, would return to private, local ownership with an allegiance to readers and local residents, not to distant shareholders.

“Truth is, I prefer to think that I have joined the Globe, not purchased it, because great institutions, public and private, have stewards, not owners,” Henry wrote. “Stewardship carries obligations and responsibility to citizens first and foremost — not to shareholders.”

Henry’s journalistic manifesto was greeted with glee at the home of the Globe on Morrissey Boulevard and across Greater Boston. But in Worcester — New England’s second-largest city and the home of the Telegram & Gazette, the other newspaper Henry acquired as part of a package deal from the New York Times Co. — there was a sense of foreboding. Henry never mentioned the T&G in his manifesto, and that omission was noticed.

“He writes that long essay in the Globe without a mention of the Telegram. It left people buzzing,” says Tim Murray, the former lieutenant governor and the current head of the Worcester Chamber of Commerce. “What’s he going to do with it? After all, it’s as important to Worcester and central Massachusetts as the Globe is to Boston and eastern Massachusetts.”

But Henry soon moved to put those fears to rest. Just before Thanksgiving last year, he showed up with almost no advance notice at the Telegram & Gazette’s offices in downtown Worcester. At separate meetings with the business and editorial staffs, Henry confirmed rumors that he planned to sell the Telegram & Gazette, but said his goal was to find a local owner for the paper.

“You need a local owner,” he said. “A local owner can sit down with advertisers, readers, and community leaders and ask for their support. I’m looking for someone with tremendous energy and a passion for this newspaper.”

At his talk in the newsroom, Henry went even further, saying that he wouldn’t abandon the newspaper if a local owner failed to turn up. “This is not a forced sale,” he said. “If we don’t find the right owner, you’re stuck with me.”

That quote, which was reported in the Telegram, was exactly what many people in Worcester wanted to hear. Many reporters at the paper worried the paper might be sold to a chain such as GateHouse Media, the owner of the Quincy Patriot Ledger, the Herald News in Fall River, the Enterprise of Brockton, and a long list of weekly newspapers. Many Worcesterites thought it would be good for the region if the Telegram was owned by someone local, someone like them. Henry by no means is a local — the billionaire businessman is officially a resident of Florida — but he owns a home in Brookline and his ownership of the Red Sox and the team’s past success have made him something of an honorary New Englander.

But as the sale process for the Telegram kicked into high gear, the local groups interested in the Telegram found themselves on the outside looking in. They thought Henry was asking way too much money. They were put off by his hired-gun representatives, who were portraying the newspaper as a bloated organization in need of steep staff cuts. Henry himself never met with locals, even to do a courtesy meet and greet. Instead, Henry sold the newspaper to Halifax Media Group of Daytona Beach, Florida, the antithesis of local ownership. The company’s headquarters is 1,200 miles away from Worcester. The Telegram is now one of 36 newspapers owned by the chain. All of them are located in the southeast except for the Telegram.

The chain’s major shareholders are three private equity firms, Stephens Capital Partners, JAARSSS Media, and Redding Investments, who tend to be more interested in profits than stewardship. As a condition of the sale, Henry laid off a quarter of the Telegram’s staff.

The sale rubbed a lot of people in Worcester the wrong way. They felt as if Henry had lied to them, and no one was calling him on it. In its coverage of the sale, the Globe never mentioned Henry going back on his word or ordering layoffs. Telegram stories did note Henry’s positions had changed, but didn’t press the issue. The newspaper’s new management also tried to conceal the staff cuts.

CommonWealth offered Henry a chance to explain his change of heart, but he declined. Instead, he issued a terse, two-sentence statement through the Globe’s spokeswoman that made clear how far his role as a steward extended. “My focus is clear — a Boston Globe that is known for its journalistic excellence and sustainable business model,” he says. “The Worcester Telegram & Gazette was outside that focus, so I sold it after a thorough process in which no local parties chose to participate.”

LUCKY AND SMART

John Henry has an uncanny knack for being in the right place at the right time and making the most of it. When his father died in 1975 and he took over the family farm in Arkansas, Henry stumbled into futures trading and ultimately made a fortune at it. When he was desperate to get out of Miami and his ownership stake in the Florida Marlins, Major League Baseball and commissioner Bud Selig gave him a way out. That way out led to Les Otten and Tom Werner, who were trying to buy the Boston Red Sox and had just lost their biggest financial backer. Henry stepped into that role in 2002, and the group, despite being viewed as a bunch of outsiders by many die-hard Sox fans, succeeded in purchasing the baseball team for $695 million. The Red Sox went on to win the World Series in 2004, 2007, and 2013, and the team is valued at $1.5 billion today, according to Forbes magazine.

In 2013, before the start of the baseball season, another business opportunity presented itself. The New York Times was shedding assets unrelated to the Times newspaper brand and decided to sell its New England Newspaper Group, which consisted of the Globe, the Telegram & Gazette, the newspapers’ websites, and a 49 percent stake in a free subway newspaper called the Metro. Henry, who had begun analyzing the newspaper business several years before, was interested. According to one source, Henry approached his Red Sox partners about buying the newspapers, but they practically laughed him out of the room. What did they want with newspapers? The business is dying.

But Henry once again saw value where others saw nothing. He had never read the Telegram & Gazette, and had little interest in it. But he considered the Globe, like the Red Sox, an important community asset. Some have portrayed Henry as a sugar daddy riding to the rescue, but he never saw himself that way. He wanted to figure out a way to put the newspaper on solid financial footing, but he wanted to do it without putting a lot of his own money at risk.In 2013, before the start of the baseball season, another business opportunity presented itself. The New York Times was shedding assets unrelated to the Times newspaper brand and decided to sell its New England Newspaper Group, which consisted of the Globe, the Telegram & Gazette, the newspapers’ websites, and a 49 percent stake in a free subway newspaper called the Metro. Henry, who had begun analyzing the newspaper business several years before, was interested. According to one source, Henry approached his Red Sox partners about buying the newspapers, but they practically laughed him out of the room. What did they want with newspapers? The business is dying.

He started by negotiating an incredibly good deal with the New York Times. Henry paid $70 million for everything — two newspapers, two websites, two printing facilities, and, most important, two profitable enterprises — and the Times retained all the pension obligations. It was a monumental write-down for the Times Company, which had paid $1.1 billion for the Globe in 1993 and $296 million for the Telegram & Gazette in 2000.

The Times sold to Henry even though other bidders were ready to pay more — as much as $40 million more. No one at the Times ever explained why Henry got the nod. The Globe reported it was because Henry was paying in cash and didn’t have a lot of partners. Others suggested Henry was given a hometown discount, perhaps because the Times and Henry had some history. The Times was one of Henry’s original partners in the Red Sox deal, and made out quite well. The company invested $75 million for a 17.75 percent stake in the club in 2002. Eight years later the Times began selling its shares, recouping more than $210 million in all for a pretax gain of nearly $129 million.

Henry is now selling off some of the assets he acquired from the Times, and it seems likely he will recoup all of his original $70 million investment. Henry has already sold the Telegram & Gazette for an estimated $17.5 million. He is now preparing to sell the Globe property on Morrissey Boulevard in Dorchester and preparing to move the Globe’s printing operation to the former Telegram & Gazette printing facility in Millbury. The Morrissey Boulevard property, located across from Boston College High School and near UMass Boston, is assessed at $40 million, but many believe it will fetch far more.

As Henry puts the deal together, folks in Worcester are looking on in stunned disbelief. Michael Angelini, a partner at Bowditch & Dewey, a Worcester law firm, and one of a group of local executives who tried to broker local ownership of the Telegram & Gazette, says Henry is coming out ahead on the deal. “He got something for nothing,” he says.

Murray, the former lieutenant governor now helming the Worcester Chamber, says it would have been nice if Henry had treated potential buyers of the Telegram & Gazette the way the Times treated him. “He went with the highest bidder in Worcester when he was given a hometown discount by the New York Times,” Murray says.

STAYING LOCAL

Harry Whitin probably knows more about the Telegram & Gazette than anyone else. He worked at the newspaper for more than 40 years, serving as a general assignment reporter, a State House reporter, an editorial writer, a regional editor, the executive news editor, the managing editor, and, for 20 years, the editor. He also worked stints as assistant to the publisher, director of employee relations, and director of circulation and marketing services.

Whitin says the paper carries enormous value for central Massachusetts, but its value as a going business is limited. He should know. He came close to buying the newspaper in 2009 and registered as a bidder again last year. In 2009, Whitin partnered with Ralph Crowley Jr., the CEO of Polar Beverages in Worcester. The two men saw great potential in the Telegram’s printing plant in Millbury. Crowley, whose company produces all the private label soda products sold by the region’s supermarket chains, felt his contacts in the supermarket business would allow them to grow the Telegram’s business printing insert ads and supermarket flyers. Whitin says he and Crowley thought the printing business could keep the Telegram afloat while they figured out a way for the newspaper to survive the shift from print to digital.

With Crowley shuttling Times executives back and forth between New York and Worcester on his corporate jet, a deal seemed close. Whitin says he bought a new suit, something befitting the owner of a newspaper. “We honestly thought we had bought the paper,” he says. But at the last minute the Times called the sale off. “What has become abundantly apparent is that the T&G is making substantial progress in transforming every part of its journalistic and business operations,” Times executives said in a memo to employees.

Four years later the Times changed its mind again, selling the Globe and the Telegram to Henry. The following year Henry put the Telegram on the market, but the newspaper up for sale in 2014 was very different from the newspaper that Whitin and Crowley tried to buy in 2009. Gone was the Telegram’s office building, sold for $300,000 in 2011. Gone was the Millbury printing plant, which Henry was keeping because he saw it as key to the Globe’s own printing business. The Globe prints the Boston Herald, the Herald News, the Patriot Ledger, and the Telegram & Gazette. The Globe also handles most of the Telegram’s human resources and advertising functions, which meant any new buyer would have to spend a considerable amount of money just to reestablish the newspaper’s independence.

Henry set the minimum bid for the Telegram at $14 million, but Whitin thought that was way too high given the newspaper’s stripped-down state. Even the Times seemed to agree. As part of a lawsuit brought by news carriers of the Telegram, the Times in December 2013 had to state how much of the $70 million paid by Henry should be allocated for the sale of the Worcester newspaper. The analysis is convoluted, but it concludes the Telegram was worth just over $7 million, even though its assets (principally the Millbury printing plant) were worth nearly $15 million. With those assets removed from the sale by Henry, what he was selling was essentially a brand name, leased office space, a bunch of computers, and office furniture.

Whitin, who personally reviewed the Telegram‘s sales documents, says the newspaper was profitable. But without the printing plan, he says, it couldn’t remain profitable for long. “I, frankly, didn’t see a sustainable business without a secondary source of income,” he says.

Mark Henderson, the Telegram & Gazette’s former online director, was part of a group of employees that made presentations about the newspaper to those interested in purchasing it. He says no presentations were ever made to any Worcester people, which he thought was strange given Henry’s professed interest in selling to a local owner. He said he approached James Hopson, the interim publisher brought in by Henry to sell the paper, about briefing interested local parties on the potential for saving $1.5 million a year by having someone other than the Globe print the newspaper and handle other business functions. Henderson said Hopson told him not to worry about it.

Whitin wasn’t the only local interested in the newspaper. A group including Fred Eppinger, the president of Hanover Insurance, and Michael Angelini, the Bowditch & Dewey attorney who also served as chairman of the Hanover board, wasn’t interested in buying and running the T&G, but they were interested in keeping it going, preferably under local ownership. Angelini says a representative of the group — sources say it was Eppinger — called Henry to encourage him to sell to a local owner. If no local owner stepped forward, Eppinger asked Henry to circle back with him to see if some local bidding group could be put together. Henry never called back.

Whitin wrote a letter to Henry in late February, predicting no local buyer would materialize and reminding Henry of his civic responsibilities.

“Your sales agents are marketing the T&G as a bloated organization that seems to be making a profit in spite of itself,” Whitin wrote in his letter. “They are telling potential owners that cost-cutting, including staff reductions of between 20 and 30 percent, will produce a sustainable business model with a stronger bottom line. That’s really putting a lot of lipstick on the pig. It actually means a diminished product, which in turn means erosion of advertising and circulation and the eventual loss of a strong independent newspaper in New England’s second-largest city.”

Whitin urged Henry to hang on to the paper, to use it as a laboratory for his efforts to find a sustainable business model. “It’s simply the right thing to do,” he wrote. “Your message to readers of the Globe applies equally to readers of the T&G. If you sell to out-of-towners who will implement massive staff and product cuts in search of short-term profit, you will have broken faith with those Worcester readers and have established an ugly double standard.”

Whitin never heard back from Henry. “He never talked to us,” he says. “He never wanted to talk to anyone out here. Everyone just got the cold shoulder.”

SLASH AND BURNED

Halifax Media, the new owner of the Telegram & Gazette, won’t discuss its plans for the newspaper. Officials at the Florida headquarters referred questions to the newspaper’s new publisher, James Normandin, but he wouldn’t return phone calls. He held an hour-long meeting with the staff on his first day at work in early September, but disclosed little new information. Many suspect Halifax bought the Telegram with the notion of building a nucleus of newspapers in New England. Halifax also reportedly bid on the Providence Journal, but that newspaper was sold to GateHouse Media for $46 million in July. GateHouse owns a slew of newspapers in the area, including the Herald News in Fall River, the Standard-Times in New Bedford, the MetroWest Daily News, the Enterprise of Brockton, and the Cape Cod Times.

Beyond the 28 layoffs at the Telegram & Gazette initiated by Henry, there have been few visible changes at the newspaper. A few reporters have been hired, but it’s unclear whether the staff expanded or the new people just replaced people who left. Halifax eliminated the T&G’s 401K match, increased the employee cost for medical benefits, trimmed vacation time, and implemented a no-jeans policy. The company also increased the length of the work week from 37.5 to 40 hours, which increased each worker’s paycheck slightly.

“This is a company that takes advantage of the law to the utmost. If they don’t have to provide something, they don’t,” said one employee, who asked not to be identified because Halifax officials have instructed workers not to talk to the press.

James Dempsey, a former columnist at the Telegram & Gazette and currently a professor at Worcester Polytechnic Institute, says there have been repeated staff cuts over the years as the Telegram has adjusted to lower and lower print revenues. But Dempsey, like others in town, says he has a hard time pinpointing how the newspaper has changed.

“It’s hard to quantify,” he says. “You don’t see what isn’t there.”

With Halifax’s arrival, the newspaper no longer has a reporter at the State House in Boston and political coverage overall is now minimal. The newspaper has moved away from investigative reporting and only one editorial writer is left.

Murray says he misses the way the old Telegram & Gazette would localize stories for a central Massachusetts audience. He said the Legislature this year was considering a bill to expand the Boston Convention and Exhibition Center, and local officials were pushing for inclusion of more funding for the DCU Center in Worcester. Murray says the Telegram in the past would have done a story on the legislation and Worcester’s interest in it, but not this year. “That’s a big deal and nobody up there was asking, where does this stand?” he said. “That presence at the State House is gone.”

Whitin, the former editor of the Telegram, is very disappointed with how everything turned out, but he’s moving on. As for Henry, Whitin says the Red Sox owner’s manifesto on newspaper ownership didn’t amount to anything. “As far as Worcester goes, it turned out to be nonsense,” he says.

Henderson, the former Telegram employee, is also disappointed. “I share the feeling of a lot of people in Worcester that John Henry did not do right by the city,” he says.

Angelini, the attorney and Worcester power broker, says his opinion of Henry was changed by what happened. “Someone who makes a promise and breaks it is suspect. That’s my personal view,” he says.

Murray is the most outspoken, particularly when shown the short statement Henry gave to CommonWealth. “Mr. Henry is entitled to his own opinions, but not his own facts,” Murray says. “He looked in the eyes of the Telegram staff and the rest of the community and said he wanted to keep this local or it would stay with him. A lot of people when he made that statement breathed a sigh of relief, but he never talked to the potential local bidders or tried to work with them. The way it was handled was bush league. There was an indifference or an arrogance that is just unfortunate.”