Union Group Led by Eisendrath Outduels Trib Owner to Acquire Sun-Times

The Eisendrath group’s deal preserves two independent newspaper voices in Chicago, one of the last two-newspaper towns in America. Tronc had vowed to operate the Tribune and Sun-Times as independent titles, though media observers had expressed skepticism over how long that might last.
Mitchell Armentrout
July 12, 2017
An investor group led by former Chicago Ald. Edwin Eisendrath and the Chicago Federation of Labor is poised to purchase the Chicago Sun-Times.
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An investment group led by former Chicago Ald. Edwin Eisendrath that includes a coalition of labor unions acquired the Chicago Sun-Times and Chicago Reader on Wednesday, staving off a competing bid for the papers by the owner of the Chicago Tribune.

“A great group has come together and made sure that a genuine voice with honest and good reporting that connects with working men and women thrives,” Eisendrath said shortly before the deal closed.

“The Sun-Times has been an important part of Chicago for our whole lives,” Eisendrath added. “We are inspired by the writing and reporting, and a group of civic-minded leaders wanted to save that.”

Eisendrath said he didn’t yet have permission to identify all the members of his investment group. Besides Eisendrath, it includes corporate restructuring expert William Brandt, the Chicago Federation of Labor, other local labor unions and about a half-dozen other individuals.

A press conference to announce the deal is set for Thursday.

“Our investors include more than half a million hardworking people around Chicago, and you can bet we’ll be talking with a voice that resonates with the working class,” Eisendrath said. “We’re going to organize around that to raise circulation.”

Terms of the sale weren’t disclosed. But a source involved in the transaction said the purchase price of Sun-Times parent Wrapports LLC totaled only $1.

The Eisendrath group, called ST Acquisition Holdings LLC, won over the U.S. Department of Justice’s Antitrust Division — which is responsible for investigating newspaper mergers and oversaw the sale — by securing more than $11.2 million in operating funds to bankroll the company for an undisclosed period.

The Eisendrath group edged out Tronc Inc., which owns the Tribune, Los Angeles Times, Baltimore Sun and several other newspapers across the country.

Tronc Chairman Michael Ferro — the principal owner in Wrapports before he assumed a controlling interest in Tronc and donated his Wrapports shares to a charitable trust — had long expressed an interest in single ownership of both the Tribune and Sun-Times. Tronc, short for Tribune online content, had announced its intent to buy the Sun-Times in May, setting forward the process overseen by the Justice Department by which others could bid.

Traditionally, the federal government has frowned on a single entity controlling multiple media operations in the same market. So the sale process required Wrapports to sell to a bidder other than Tronc if that bidder could prove it had the money to operate the Sun-Times, hence the $1 purchase price.

The Eisendrath group’s deal preserves two independent newspaper voices in Chicago, one of the last two-newspaper towns in America. Tronc had vowed to operate the Tribune and Sun-Times as independent titles, though media observers had expressed skepticism over how long that might last.

The Chicago News Guild, which represents unionized newsroom employees at the Sun-Times and Reader, had been vehemently opposed to Tronc buying the Sun-Times and Reader. The Guild is not one of the unions involved in the planned purchase.

“We’re thrilled with this development,” News Guild consultant David Roeder said. “We look forward to working with Edwin Eisendrath and his backers in charting a new course forward for the Sun-Times and Reader.”

Tim Knight — president of troncX, a division of Tronc — said the company “has always been committed to keeping the Sun-Times an independent media voice within the city of Chicago. We’re pleased to see that happen and we look forward to the new owners honoring the Chicago Tribune’s contractual agreement for printing and distribution services under the terms of our multi-year agreement.”

Wrapports’ $25 million-a-year contract with Tronc to print and distribute the Sun-Times is a major source of revenue for the Tribune owner. Controlling that revenue stream going forward was a major incentive for Tronc to purchase Wrapports.

Sun-Times Publisher and Editor in Chief Jim Kirk declined to comment.

Eisendrath’s group submitted a bid for the paper last month, after the Justice Department required the Sun-Times to publish an advertisement seeking other buyers for the Sun-Times, Reader and other Wrapports assets, including the Straight Dope website.

“I think it’s a worthwhile challenge,” Brandt, the corporate restructuring expert who is part of the group, said earlier this week. “It’s a money-losing venture, but this is one of those things where you take a gulp and you do it for the good of the city. Chicago needs two newspapers.”

Brandt also said the group includes several people “well-known in the political scene.”

Representatives from the Chicago Federation of Labor said the paper will retain its independence in reporting on labor unions.

“We didn’t get involved in order to get a pass from reporters,” CFL secretary-treasurer Bob Reiter said. “Our reporters will look at what is happening and report the story. If that means someone in the labor movement has an issue, then that’s the story.

“We got involved to protect the institution of journalism, but it’s not just about keeping the paper’s doors open. The Sun-Times is a historic paper and we’ve been given the opportunity to transform it. We’ve got a lot of exciting ideas,” Reiter said.

“The little guy won here,” said CFL President Jorge Ramirez. “This is about fair, honest and balanced reporting. The Sun-Times has a rich history of that.”

Contributing: Sam Charles

Below is the full statement of the Justice Department regarding the Wrapports sale:

Public Sale Process Resulted in Alternative Buyer of the Chicago Sun-Times

WASHINGTON — The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into the possible acquisition of the Chicago Sun-Times by tronc Inc., the owner of the Chicago Tribune:

On May 15, 2017, the Antitrust Division announced that it was investigating the possible acquisition of the Chicago Sun-Times by tronc because the merger of the two daily newspapers in Chicago would raise significant antitrust concerns.

The Division’s investigation focused on whether the Chicago Sun-Times was a failing company under the Department of Justice/Federal Trade Commission Horizontal Merger Guidelines, which provide that a transaction is not likely to be anticompetitive if the assets of one of the firms would otherwise exit the market.  One of the conditions required to be met in order to establish the “failing firm” defense is that the failing firm “has made unsuccessful good-faith efforts to elicit reasonable alternative offers that would keep its tangible and intangible assets in the relevant market and pose a less severe danger to competition than does the proposed merger.”  Horizontal Merger Guidelines at § 11.  Because this condition may not be satisfied by a confidential sale effort, a seller may choose to undertake a public sale process to augment its effort to elicit reasonable alternative offers.

In this case, Wrapports LLC, the owner of the Chicago Sun-Times, launched a public sale process on May 16, 2017, which the Division monitored closely.  This process resulted in Wrapports selling the Chicago Sun-Times to an alternative buyer, ST Acquisition Holdings LLC, which does not currently own an interest in any other newspaper. As a result, the Division will be closing its investigation of the possible acquisition of theChicago Sun-Times by tronc.

The Division notes that some transactions that rely on a failing firm defense may not be reportable under the Hart-Scott-Rodino Act.  The Division encourages firms whose non-reportable transaction relies on a failing firm defense to: (i) inform the Division about the proposed transaction prior to consummation; (ii) allow for sufficient time for the Division to conduct a thorough investigation, which may decrease the possibility of a precipitous enforcement action; and (iii) plan in advance for the costs of undergoing such an investigation.  At the same time, when voluntarily notified of such a transaction, the Division endeavors to conduct its investigation expeditiously under the circumstances.  Here, Wrapports helpfully notified the Division of the Letter of Intent that it had entered into with tronc, which enabled the Division to open its investigation and monitor the public sale process.

The Antitrust Division is the agency responsible for investigating mergers involving newspapers.

Tronc is a Delaware corporation headquartered in Chicago.  It publishes major daily newspapers across California, Illinois, Florida, Maryland, Connecticut, Virginia and Pennsylvania.  Wrapports is a privately-held Delaware limited liability company based in Chicago.  ST Acquisition Holdings is a privately-held Delaware limited liability company based in Chicago.

The Antitrust Division’s Closing Statement Policy

The Division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases.  This statement is limited by the Division’s obligation to protect the confidentiality of certain information obtained in its investigations.  As in most of its investigations, the Division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public.  Consequently, readers should not draw overly broad conclusions regarding how the Division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms.  Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the Division in any future enforcement actions.  Guidance on the division’s policy regarding closing statements is available atwww.justice.gov/atr/public/closing/index.html.

July 13, 2017