The puzzling ProJo purchase

When GateHouse Media, the conglomerate that owns scores of smaller daily and weekly papers across Massachusetts, entered Chapter 11 bankruptcy last year, it did so with an eye on getting bigger. Yesterday, GateHouse’s successor made its first big post-bankruptcy buy, gobbling up the Providence Journal for $46 million.

The sale of the Providence Journal is the latest in a string of recent New England newspaper sales. Red Sox owner John Henry bought the Boston Globe last year for $70 million, and recently spun off the Worcester Telegram & Gazette for a reported $19 million.

 

Henry, like new Washington Post owner Jeff Bezos, has described his foray into the newspaper industry as an attempt to find a sustainable business model for an industry that has been in steady decline for more than a decade. By contrast, both GateHouse 2.0 (a new publicly-traded holding company called the New Media Investment Group) and the Florida publisher that just bought the Telegram & Gazette from Henry are backed by private equity. They’re far more concerned with near-term profits than long-term sustainability. So it’s intriguing that, amid a sustained dip in industry ad revenues, they’re in aggressive growth mode.

The Boston Business Journal‘s Jon Chesto dives deep into the ProJo sale. Chesto views the ProJo acquisition as a departure from GateHouse’s normal strategy of buying up smaller dailies and weeklies. Providence is a far bigger market than Quincy and Brockton, where two of GateHouse’s larger area properties are located. Chesto also gawks at the Providence paper’s $46 million price tag, especially since the paper’s downtown headquarters isn’t part of the deal: “That’s a pretty steep sum for a once-great paper that’s now a shadow of its former self, with a daily circulation of 72,000… By way of comparison, that’s more than twice what John Henry received for selling the Telegram & Gazette to Halifax Media earlier this year, and the T&G is only somewhat smaller.”

Chesto also notes that, after subtracting out Henry’s gain on the Telegram sale, he paid as much for the much larger Globe as GateHouse is paying for the ProJo. And unlike the ProJo, the Globe also came with valuable real estate.

Chesto advances two theories about why GateHouse is paying so much to acquire the Providence paper. He says the newspaper’s printing plant is a money-maker, since there are so few printers left in the area. He also reports that GateHouse sees Providence as an attractive place for its online marketing subsidiary, which executives believe is “the primary engine for growth at the company.”

Still, it’s difficult to see much positive momentum in GateHouse/New Media’s financials. The company’s 2013 revenues looked better than they did in 2012, but were still well below where they were at the depths of the recession; the company has been staying afloat by engaging in repeated rounds of cost-cutting. Absent the accounting magic from its bankruptcy, GateHouse/New Media lost $74 million last year. It lost another $6.7 million in the first three months of 2014 — an improvement from the same period last year, but still not the kind of showing that should give anyone money to burn in Providence.

PAUL MCMORROW

 

BEACON HILL

Six senators propose compromise language on a contested provision in gun legislation passed by the House and Senate, State House News reports. The development follows a State House press conference yesterday where more than a dozen police chiefs from across the state joined with gun-control activists to criticize a Senate version of the bill.

The Massachusetts House is set to debate an abortion clinic safety bill, the Associated Press reports.

Bourne officials are not taken with Gov. Deval Patrick‘s call for a military base in the town to provide temporary housing for refugee children from Central America. A Globe poll says Massachusetts voters are divided fairly evenly on the issue. About 150 people rally in Lynn in support of accepting immigrant children and against comments made by Mayor Judith Flanagan Kennedy that the town cannot financially absorb all the kids, the Item reports. And Massachusetts sheriffs return from a trip to the US-Mexico border, where they learned what’s prompting the influx of immigrants, the Telegram & Gazette reports.

CASINOS

Robert Steele , a former Republican congressman from Connecticut, writes in CommonWealth that casino revenues are falling there and have brought other problems that should make Massachusetts wary of joining the casino club.

CommonWealth ‘s Bruce Mohl writes that Steve Wynn‘s Las Vegas casino has shelled out $28 million for a sculpture of Popeye, even as his company drives a very hard bargain in negotiating mitigation payments for communities surrounding its proposed Everett casino.

MUNICIPAL MATTERS

Medway is missing about a quarter of its water production and has no idea what happened.

A Pittsfield Human Rights Commission meeting descends into chaos during a discussion of a complaint against Mayor Dan Bianchi. CommonWealth’s Gabrielle Gurley explored the city’s affirmative action debate in the Summer issue.

NATIONAL POLITICS/WASHINGTON

The New York Times finds that New York Gov. Andrew Cuomo shut down an anti-corruption panel after the investigators, whom Cuomo tapped to go after Albany legislators, started asking questions that hit close to the governor himself.

ELECTIONS

Charlie Baker doesn’t believe that the Obama administration has been transparent in the current border crisis, but argues that Massachusetts should assist in helping to house young refugees.

Shirley Leung says both Baker and Steve Grossman have flip-flopped on the issue of Partners HealthCare’s proposed hospital acquisitions, suddenly becoming sharp critics of fellow gubernatorial hopeful Martha Coakley.

BUSINESS/ECONOMY

The two new co-CEOs of Market Basket urge their employees to return to work, WBUR reports. Customers join the protests, the Lowell Sun reports. An MIT professor sees three lessons for corporate America in the unprecedented protests at the supermarket chain.

EDUCATION

North Carolina approves a law authorizing a rewrite of the Common Core standardized test, the Associated Press reports.

HEALTH CARE

Two conflicting federal court rulings relating to subsidies for lower-income residents cast confusion and doubts over the Affordable Care Act.

Trying to address a shortage of primary care doctors, Missouri passes a law allowing medical school graduates to practice in rural areas without first doing their residency training, Governing reports.

ENERGY/ENVIRONMENT

Greater Boston examines the effect climate change is having on New England’s seafood industry.

Andover officials look for another route for a natural gas pipeline that under current plans would cut through the town’s conservation land, the Eagle-Tribune reports.

The federal Bureau of Offshore Energy Management will consider how potential wind developers work with communities as the agency prepares for auctioning a new area off the Bay State coast.

CRIMINAL JUSTICE

Federal investigators trace the gun allegedly used to kill MIT police officer Sean Collier to a Cambridge heroin dealer; the dealer allegedly gave the gun to Tamerlan and Dzhokhar Tsarnaev.

A Newburyport strip club owner is hauled into court for failing to pay two of his dancers. An earlier judgment held he treated the women illegally as independent contractors, the Eagle-Tribune reports.