It's official: Press Democrat sold to local group

KEVIN MCCALLUM
THE PRESS DEMOCRAT

Twenty-seven years after The Press Democrat was sold to the New York Times, it returned to local ownership Thursday as a prominent group of power brokers and wealthy investors closed a deal they said will protect the paper's legacy of quality local journalism.

The purchase of The Press Democrat, Petaluma Argus-Courier and the North Bay Business Journal from Florida-based Halifax Media was completed shortly before noon. The buyer, Sonoma Media Investments, is a group formed in 2011 to buy the twice-weekly Sonoma Index-Tribune newspaper and Sonoma Magazine.

Publisher Bruce Kyse choked up when he announced the deal a short time later to employees, who erupted in applause. He called the Press Democrat and Argus-Courier "long-term institutions that help define the history of Sonoma County," and said he was gratified to see them protected.

"This is kind of an historic moment," Kyse said. "This is a big deal."

News of the impending sale and disclosure of the key players were announced last week. They include lobbyist and Sonoma-based developer Darius Anderson; Bill Hooper, who heads Anderson's development firm, Kenwood Investments, and will be chief operating officer; former North Coast congressman Doug Bosco of Santa Rosa, who will becomes the paper's general counsel; and Steve Falk, a former San Francisco Chronicle publisher who is chief executive officer of the investment group.

It also was revealed that six local investors proved crucial in making the deal a reality. Among them are some of the region's most influential names, including Jeannie Schulz, wife of the late Charles M. Schulz, whose Peanuts comic strip empire was built on newspapers, and Norma Person, whose late husband Evert Person sold The Press Democrat to the New York Times in 1985.

"All of them have their roots, their hearts and their soul in Sonoma and they are all committed to this endeavor," Anderson said.

Terms of the deal were not disclosed. Halifax Media purchased the three papers in January from the New York Times Co. along with 13 other newspapers, most of them in the Southeast, for a total of $143 million.

It has long been speculated that Halifax would spin off the three California papers because they were geographically isolated from the rest of the group.

"I don't think they were bad people," Anderson said of Halifax. "I think they weren't focused on the West Coast."

Halifax CEO Michael Redding could not be reached for comment.

The deal is the latest in a small but increasing number of newspaper purchases by local investors seeking to preserve their community paper, said Rick Edmonds, media business analyst for the Poynter Institute, a nonprofit school of journalism located in St. Petersburg, Fla.

Such groups "aren't really interested in turning a buck or flipping it," Edmonds said. "Their main motivation is that they want to have a good newspaper."

Anderson began his pursuit of the newspaper shortly after Halifax purchased it in January and negotiations have been ongoing for months. Financing the deal proved tricky, requiring a combination of local investors' equity and a bank loan, which Anderson said was very difficult to secure.

"To try to get a bank to make an investment in a newspaper is a very, very challenging task," Anderson said.

The group purchased the three newspaper businesses as well as two pieces of real estate in Rohnert Park: the 12.7-acre Press Democrat printing plant and an adjacent 7.3-acre vacant parcel.

The sale does not include the paper's Mendocino Avenue office building and four nearby parking lots. Those continue to be owned by Halifax Media Group, but are in the process of being sold to another investment group.

Sonoma Media Investments has signed a 10-year lease for the second and third stories of the downtown building and surrounding parking lots. Plans call for consolidating the newspaper offices into the second and third floors, which will allow the first floor to be leased to another tenant.

Falk said Thursday he planned to resign as the chief executive of the San Francisco Chamber of Commerce and move to Sonoma County, where he will work in the Press Democrat building daily.

He said he always held The Press Democrat in high esteem as a competitor when he worked at the Chronicle, and looked forward to returning to the newspaper business.

But that business has changed dramatically since Falk left the Chronicle in 2004. With readers and advertisers moving online, newspapers across the nation struggle to survive. Over the past decade, The Press Democrat has lost more than a third of its circulation and suffered steep declines in both classified and traditional advertising revenue.

Falk, as he spoke to employees at the Glaser Center of the Unitarian Universalist Congregation, acknowledged the group faces an uphill battle.

"Some would say its a good thing we're meeting in a church to talk about the future of the newspaper business," he said. But he also said he was confident that good journalism can be a profitable business model.

"It won't be easy, but there's a huge opportunity here and we are all glad to be a part of it," he said.

He thanked the 50 members of the newsroom union for unanimously approving a new contract with the new owners on short notice. The group's lender, Comerica Bank, required ratification of the contract — particularly the elimination of the ownership group's need to contribute to the union's pension plan — before closing the transaction.

"That got the deal done," Falk said.

Other concessions included 5 percent pay cuts for all members and the elimination of a fifth week of vacation. In exchange, the contract provides protection from layoffs for three years.

Falk acknowledged the deal is "not without some sacrifice," on the part of employees, but he said the opportunity to save the paper outweighed the sacrifice.

The future of the paper was at risk under Halifax, Anderson said.

The Florida-based company was in the process of dismantling the paper by selling off all the real estate assets when Anderson approached them, he said.

"The Press Democrat was going to be left with no physical assets at all," Anderson said.

One potential buyer Halifax was working with, Black Press of Vancouver, B.C., was planning to buy the paper without any of the real estate and cut the paper's operating budget by 43 percent, Anderson said. Black Press is an owner of the San Francisco Examiner and Bay Guardian.

By contrast, Anderson said he and the investors hope not only to preserve the quality of the local journalism but bring "additional resources and firepower" to the organization.

Anderson said he would not have considered the deal if it did not include the purchase of the Rohnert Park property.

Owning the printing plant is central to the paper being able to control its destiny, he said. The presses are in excellent shape, the Index-Tribune is printed there, and the group will be exploring ways to securing additional printing jobs, Falk said.

The plant already has proven its value because it "kept the bank at the table" when deciding whether to lend money for the purchase, Falk said. The adjacent 7.3-acre parcel also has significant value because of its proximity to a casino under construction on the western edge of Rohnert Park.

Anderson is a former consultant to the Federated Indians of Graton Rancheria and a lobbyist for the tribe's partner, Station Casinos of Las Vegas, which together are building the 3,000-slot machine casino.

The land has development potential, and could be either developed by the group or sold in the future, Anderson said.

"There are some possibilities and we will look at those at the appropriate time," Falk said.

Other newspaper purchases are not out of the question, he said.

Sonoma Magazine, a glossy quarterly lifestyle publication covering the Sonoma Valley, could also be broadened to cover all of Wine Country and its circulation expanded nationwide. Doing so could provide an attractive platform for high-end advertising dollars, he said.

What other consolidation efforts the group plans is unclear. Anderson praised the way Kyse has preserved the independence of the Argus-Courier and the Business Journal, and said he expected that to continue for the Index-Tribune.

Kyse said the next few weeks will be hectic as the transition to the new group rolls out. "This is a transaction that is happening on the run," he said.

But he also said there will be some immediate benefits, including the hiring of 10 new positions that have gone unfilled.

In addition, customer service for the circulation department will return to being handled locally, instead of requiring customers to call the Philippines.

Joint marketing or advertising of the four publications, however, could make it easier for the papers to attract national advertisers, Hooper said.

"It's critical that we make some money here and that we have a financial model that is profitable," Falk said.

All the partners agree that the journalistic independence of the publications is paramount, Falk said, vowing to act as a "firewall" against undue influence.

"I will protect that at all costs," Falk said.

Anderson, who has seen his share of negative press coverage, stressed that he welcomed hard-hitting investigative and watchdog journalism, even if it raised questions about his businesses and interests.

"None of us are going to get in your way because if we do, it dilutes the value of our investment," Anderson said.

(You can reach Staff Writer KevinMcCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. On Twitter @citybeater.)

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