Hes acutely aware of the risksI may end up with egg on my face, he saidbut he believes its worth trying to develop a successful model that could be replicated in other markets. Feb 16, 2021 at 8:05 pm. Heath hopes the well never runs dry, but hes going to keep pumping until it does. Since Alden's . As a privately held hedge fund, Alden doesnt have to reveal much to the public. But there are some clues here and there. It wasn't the first newspaper acquisition for this hedge fund firm, nor is it the only firm of its kind eyeing the nation's newspapers. You could look to Oakland, California, where the East Bay Times laid off 20 people one week after the paper won a Pulitzer. When the city-hall reporter left a few months later, he picked up that beat too. Alden Global Capital owns 56 dailies under Digital First Media (Alden also owns 32% of Tribune 10 dailies in Column C.) Tribune Media owns 10 dailies. Who Profits From Alden Global Capital? Alden Global Capital, a New York-based hedge fund that this year became the second largest newspaper publisher in the United States, has made an offer to purchase Lee Enterprises, the media company that owns 75 daily newspapers, including the St. Louis Post-Dispatch. He quotes H. L. Mencken, the papers crusading 20th-century columnist, on the joys of journalism: It is really the life of kings. Newspapers Affect Us, Often In Ways We Don't Realize, 'Project Mayhem': Reporters Race To Save Tribune Papers From 'Vulture' Fund. They call Alden a vulture hedge fund, and I think thats honestly a misnomer, Johnson said. But there was still a sliver of hope: Tribune and Alden agreed that the hedge fund would not increase its stake in the company for at least seven months. Its hard to imagine theyd show, anyway. AP. Here was one of Americas most storied newspapersa publication that had endorsed Abraham Lincoln and scooped the Treaty of Versailles, that had toppled political bosses and tangled with crooked mayors and collected dozens of Pulitzer Prizesreduced to a newsroom the size of a Chipotle. Knight first reported its investment in Alden in 2010, noting the fair market value of its Alden holdings was $13.4 million. But it turned out that Smith had so many doorsteps16 mansions in Palm Beach alone, as of a few years ago, some of them behind gatesthat the plan proved impractical. But if you really started fucking up in grandiose and belligerent ways, if you started stealing and grifting and lying, eventually somebody would come up behind you and say, Youre grifting and youre lying and theyd put it in the paper., The bad stuff runs for so long now, he went on, that by the time you get to it, institutions are irreparable, or damn near close., Take away the newsroom packed with meddling reporters, and a city loses a crucial layer of accountability. Bainum told me hed come to appreciate local journalism in the 1970s while serving in the Maryland state legislature. The editor in chief mysteriously resigned, and managers scrambled to deal with the cuts. [2][3] By mid-2020, Alden had stakes in roughly two hundred American newspapers. I put the question to Freeman, but he declined to answer on the record. Reporters kept reporting, and editors kept editing, and the union kept looking for ways to put pressure on Alden. [32], The company has been criticized for investing money for pensions of newspaper employees in funds it manages itself. After a powerful Illinois state legislator resigned amid bribery allegations, the paper didnt have a reporter in Springfield to follow the resulting scandal. Feeling burned by the hedge fund, Bainum decided to make a last-minute bid for all of Tribune Publishings newspapers, pledging to line up responsible buyers in each market. The movement gained traction in some markets, with local politicians and celebrities expressing solidarity. But even for a group of journalists, it was tough to keep the publics attention. On the surface, the answer might seem obvious. The pay was terrible and the work was not glamorous, but Glidden loved his job. At the time, the Sun had a bustling bureau in Annapolis, and he marveled at the reporters ability to sort the honest politicians from the political whores by exposing abuses of power. But the group that jumps out to me on the list is the John S. and James L. Knight Foundation. Maybe theyd cancel their subscriptions eventually; maybe the papers would fold altogether. "A lot of cities almost operate with the assumption that there will be at least one local newspaper, in some cases several local newspapers, acting as a check on the authorities," he says. Heath Freeman in an undated photo provided by Goldin Solutions . Today, half of all daily newspapers in the U.S. are controlled by financial firms, according to an analysis by the Financial Times, and the number is almost certain to grow. [4][13], In November 2021, Alden made an offer to Lee to purchase the company in its entirety for roughly $141 million. Alden is not a newspaper company, says Ann Marie Lipinski, a former editor in chief of the Chicago Tribune. But this acquisition was profound, making Alden Global . It seemed reasonable to ask that they answer a few questions. It was all about the next quarters profit margins, says Matt DeRienzo, who worked as a publisher for Aldens Connecticut newspapers before finally resigning. Dec 9, 2021. Even in a declining industry, the newspapers still generated hundreds of millions of dollars in annual revenues; many of them were turning profits. That may well be the future of local news, he says. One conclusions even these reporters are hesitant to make is that we are all dealing within a capitalist system which has none, or few, principles to guide itself, apart from making a profit, no matter how. He told me it will begin with an annual operating budget of $15 million, unprecedented for an outfit of this kind. While some finance reporters noted that Smiths newspaper investments were all losing value, none seemed to notice that Smith and Aldens president Heath Freeman would soon start strip mining their news companies real estate and other assets. Randy claims no editorial role in the Press, and his investment in the projectwhich has little chance of producing the kind of return hes accustomed tocould be chalked up to brotherly loyalty. That might sound like a losing formula, but these papers dont have to become sustainable businesses for Smith and Freeman to make money. Two veteran journalists from the Chicago Tribune published an op-ed on Sunday challenging one of the paper's principal owners, the New York hedge fund Alden Global Capital. But while its true that Alden entered the industry by purchasing floundering newspapers, not all of them were necessarily doomed to liquidation. How exactly Randall Smith chose Heath Freeman as his protg is a matter of speculation among those who have worked for the two of them. But he couldnt help feeling that the police scandal would have been exposed much sooner if the Sun were operating at full force. Meanwhile, in Vallejo, John Glidden went from covering crime and community news to holding the title of the only hard news reporter in town, filling a legal pad with tips he knew he'd never have time to pursue. This was the core of Freemans argument. MediaNews Group came out of bankruptcy in March 2010 under the majority ownership of its lenders. A quarter of the newsroom (including many big-name reporters, columnists and photographers) took the buyouts Alden offered, and while some great reporters remain on staff, it's nearly impossible for them to fill those gaps, Coppins says. ", "Denver Post Rebels Against Its Hedge-Fund Ownership", "Tribune Says Sale to Alden Wins Approval Amid Confusion Over Key Shareholder's Vote", "Lee Enterprises Shares Jump on Takeover Offer From Alden", "The vulture is hungry again: Alden Global Capital wants to buy a few hundred more newspapers", "Colorado Group Pushes to Buy Embattled Denver Post From New York Hedge Fund", "The battle for Tribune: Inside the campaign to find new owners for a legendary group of newspapers", "Is this strip-mining or journalism? We must finally require the online tech behemoths, such as Google, Apple, and Facebook, to fairly compensate us for our original news content, he told me. The Denver Post has become the face of this struggle, due to an editorial published in its own pages lashing out against owners, New York-based hedge fund Alden Global Capital. On March 9, 2020, a small group of Baltimore Sun reporters convened a secret meeting at the downtown Hyatt Regency. . Alden, a New York City-based firm that has become the grim reaper of American newspapers, had recently increased its stake in Tribune Publishing to 32%making it the largest shareholder of the . [29] This attempt also failed, as shareholders returned both directors to the Lee board despite Alden's opposition. [4][5] The company added more newspapers to its portfolio in May 2021 when it purchased Tribune Publishing and became the second-largest newspaper publisher in the United States. The men who devised this model are Randall Smith and Heath Freeman, the co-founders of Alden Global Capital. [15][16] In March 2018, Margaret Sullivan, the media columnist for The Washington Post, called Alden "one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism. Glidden, then a mild-mannered 30-year-old, had come to journalism later in life than most and was eager to prove himself. Layout design was outsourced to freelancers in the Philippines. Some of these papers likely would have been liquidated if the fund had not stepped in to buy them, as Alden's president told Coppins. It's a tangled tale but essentially Asylum produced a film for the McDonald's charitable foundation for Leo. With aggressive cost-cutting, Alden can operate its newspapers at a profit for years while turning out a steadily worse product, indifferent to the subscribers its alienating. On . A spokesman took issue with the entirety of the story, and laid out a long list of questions attacking the integrity of the reporter, The Atlantic and some of his sources without addressing some of the more specific claims within the report. Since they bought their first newspapers a decade ago, no one has been more mercenary or less interested in pretending to care about their publications long-term health. Unless the Tribunes trajectory changes, Chicago may soon provide a grim case study. Shares of Lee Enterprises Inc. rose sharply Monday after hedge fund Alden Global Capital LLC offered to buy the newspaper publisher for about $141 million. For Freeman and his investors to come out ahead, they didnt need to worry about the long-term health of the assetsthey just needed to maximize profits as quickly as possible. I asked if anyone there at the time was aware of Aldens vulture business strategy. When lawmakers pressed for details last year on who funds Alden, the company replied that there may be certain legal entities and organizational structures formed outside of the United States.. Some publications, such as the Minneapolis Star Tribune, have developed successful long-term models that Aldens papers might try to follow. I would know he didnt mean it, and he would know he didnt mean it, but he would at least go through the motions. Glidden had heard rumblings about the papers owners when he first took the job, but he hadnt paid much attention. Other records turned up from public pension funds and filings of publicly traded companies. A Secretive Hedge Fund Is Gutting Newsrooms. So what is this Distressed Opportunities fund? [22] The appointees to the MediaNews board were replaced by new directors representing the stockholders group led by Alden Global Capital. After serving in the Carter administrations Treasury Department, Brian became widely knownand fearedin the 80s for his hard-line negotiating style. Aldens website contains no information beyond the firms name, and its list of investors is kept strictly confidential. Im repulsed by the incestuous world of New York journalism, he tells New York magazine. With Alden in control, he believes the Sun is now a prisoner that stands little chance of escape. It turned out that those ownersNew York hedge funders whom Glidden took to calling the lizard peoplewere laser-focused on increasing the papers profit margins. If you went into a lab to create the perfect bro, Heath would be that creation, says one former executive at an Alden-owned company, who, like others in this story, requested anonymity to speak candidly. [30], Alden Global Capital includes a real estate division called Twenty Lake Holdings, which primarily buys excess real estate from newspapers. I sort of bully people around to get stuff done, he boasted to The Washington Post in 1985. hide caption. He gained 100 pounds and started grinding his teeth at night. At the Pioneer Press , where its staff is down to 60, the paper produced a . By McKay Coppins. Around this time, Randy becomes preoccupied with privacy. But Glidden felt sure he knew the real reason: Alden wanted him gone. Freeman, his 41-year-old protg and the president of the firm, would be unrecognizable in most of the newsrooms he owns. [31], In 2019, Twenty Lake Holdings reported that it had acquired about 180 properties with 2.3 million square feet of real estate in 29 states. A month after he started, one of his fellow reporters left and Glidden was asked to start covering schools in addition to his other responsibilities. Instead, they gutted the place. 'Vulture' Fund Alden Global, Known For Slashing Newsrooms, Buys Tribune Papers, Stop The Presses! Hedge fund Alden Global Capital, one of the country's largest newspaper owners with a reputation for intense cost cuts and layoffs, has offered to buy the local newspaper chain Lee Enterprises for about $141 million. So far, Alden has limited its closures primarily to weekly newspapers, but Doctor argues its only a matter of time before the firm starts shutting down its dailies as well. Reinventing their papers could require years of false starts and fine-tuningand, most important, a delayed payday for Aldens investors. Inside Alden Global Capital. He shut down Project Thunderdome, parted ways with Paton, and placed all of Aldens newspapers on the auction block. To many, it just didnt seem possible that Alden would instead choose to destroy newspapers by laying off the workforce en masse and stripping papers of all their assets. John Temple: My newspaper died 10 years ago. Chicago-based Tribune Publishing on Tuesday announced a proposed sale to hedge fund Alden Global Capital in a deal valued at $630 million. He used his own money to pull court records, and went years without going on a vacation. But I had underestimated how little Aldens founders care about their standing in the journalism world. A native of Vallejo, he was proud to work for his hometown paper. It . For those who cared about the future of local news, it was hard to imagine a better outcomewhich made it all the more devastating when the bid fell through. "[18], Alden received critical coverage from the editorial staff at the Denver Post, who described Alden Global Capital as "vulture capitalists" after multiple staff layoffs. We dont hear from them Theyre, like, nameless, faceless people., In the months that followed, the Sun did not immediately experience the same deep staff cuts that other papers did. Located in the same Manhattan office building as Alden, it funds stem-cell research, health-related charities, arts and culture and Duke University, alma mater of Smiths protg Heath Freeman. But whats happening in Chicago is different. Have you heard of the hedge fund Alden Global Capital? Smith & Company, a firm founded by Randall Duncan Smith, initially using the $20,000 cash prize he and his wife won on the 1968-1970 gameshow Dream House. When a reporter asked if their work was still valued, the editor sounded deflated. Caleb will later recall, in an interview with D Magazine, asking his dad why he works so hard. In its bid to acquire Tribune Publishing, the hedge fund Alden Global Capital vowed to provide $375 million in cash to the owner of the Chicago Tribune, the Baltimore Sun and other titles a . Coppins offers several examples, like the Chicago Tribune and California's Vallejo Times-Herald. Alden Global Capital swallowed all of the Tribune's newspapers, including the New York Daily News, earlier in 2021. In 2011, Paton launched an ambitious initiative he called Project Thunderdome, hiring more than 50 journalists in New York and strategically deploying them to supplement short-staffed local newsrooms. Those that have survived are smaller, weaker, and more vulnerable to acquisition. By Julie Reynolds. By 2011, when Aldens Distressed Opportunities Fund lost more than 20 percent of its value, Knights holdings in the fund were valued at $10.7 million. Two days after the deal was finalized, Alden announced an aggressive round of buyouts. Next up: Chicago, Baltimore, and the New York Daily News. The firm has a history of purchasing newspapers to cut costs wherever . A reporter at one of his newspapers suggested I try doorstepping Smithshowing up at his home unannounced to ask questions from the porch. Now it might be facing extinction. But maybe the clearest illustration is in Vallejo, California, a city of about 120,000 people 30 miles north of San Francisco. In May, the Tribune was acquired by Alden Global Capital, a secretive hedge fund that has quickly, and with remarkable ease, become one of the largest newspaper operators in the country. Alden Global Capital, a hedge fund known for gutting local newsrooms, is seeking to buy Lee Enterprises (LEE), a publicly traded company with a chain of daily newspapers and other publications . [13], In response, the board of Lee Enterprises enacted a shareholder rights plan, colloquially known as a "poison pill", in order to ward off the purchase attempt. On more than one occasion, according to people I spoke with, he asked aloud, What do all these people do? According to the former executive, Freeman once suggested in a meeting that Aldens newspapers could get rid of all their full-time reporters and rely entirely on freelancers. He teaches his 8-year-old son, Caleb, to make trades on a Quotron computer, and imparts the value of delayed gratification by reportedly postponing his familys Christmas so that he can use all their available cash to buy stocks at lower prices in December. The best architects of the era were invited to submit designs; lofty quotes about the Fourth Estate were selected to adorn the lobby. The firm oversaw the promotion of John Paton, a charismatic digital-media evangelist, who improved the papers web and mobile offerings and increased online ad revenue. A Cornell grad with an M.B.A., Randy is on a partner track at Bear Stearns, where hes poised to make a comfortable fortune simply by climbing the ladder. Iowa-based Lee Enterprises asks investors to help fight off hedge fund Alden Global Capital. The most promising prospect materialized in Baltimore, where a hotel magnate named Stewart Bainum Jr. expressed interest in the Sun. They could be vain, bumbling, even corrupt. I felt like a terrible reporter because I couldnt get to everything.. The term vulture capitalism hasnt been invented yet, but Randy will come to be known as a pioneer in the field. What most concerns him is how his city will manage without a robust paper keeping tabs on the people in charge. Freeman would show up at business meetings straight from the gym, clad in athleisure, the executive recalled, and would find excuses to invoke his college-football heroics, saying things like When I played football at Duke, I learned some lessons about leadership. (Freeman was a walk-on placekicker on a team that won no games the year he played.). In addition to the constant layoffs, our buildings were being sold, basic office supplies became scarce and the hot water stopped working. "[25], In early December, the board of Lee unanimously rejected the Alden bid, saying that the Alden proposal "grossly undervalues Lee and fails to recognize the strength of our business today. These were not exactly boom times for newspapers, after allat least someone wanted to buy them. But he has a big idea: He believes theres serious money to be made in buying troubled companies, steering them into bankruptcy, and then selling them off in parts. It was like watching a slow-motion disaster, says Gregory Pratt, a reporter at the Chicago Tribune. With his own money, he helps his brother launch the New York Press, a free alt-weekly in Manhattan. Research shows that when local newspapers disappear or are dramatically gutted, communities tend to see lower voter turnout, increased polarization, a general erosion of civic engagement and an environment in which misinformation and conspiracy theories can spread more easily. And two, by at least 2013, those of us who worked at Alden-controlled papers (like me) were already experiencing the slashing and burning. A former Sun reporter whose work on the police beat famously led to his creation of The Wire on HBO, Simon told me the paper had suffered for years under a series of blundering corporate ownersand it was only a matter of time before an enterprise as cold-blooded as Alden finally put it out of its misery. But when I emailed his studio looking for information, I was informed curtly that the photo was no longer available. Had Smith bought the rights himself? Alden, which has built a reputation as one of the newspaper industry's most aggressive cost-cutters, became Tribune Publishing's largest shareholder in November 2019 and owns a 31.3% stake. If you want to know what its like when Alden Capital buys your local newspaper, you could look to Montgomery County, Pennsylvania, where coverage of local elections in more than a dozen communities falls to a single reporter working out of his attic and emailing questionnaires to candidates. After congratulating him on closing the deal, Bainum said he was still interested in buying the Sun if Alden was willing to negotiate. But most of them also had a stake in the communities their papers served, which meant that, if nothing else, their egos were wrapped up in putting out a respectable product. You have no way of knowing that if you dont have some nosy son of a bitch asking a lot of questions down there, he told me. Meanwhile, reporters fanned out across their respective cities in search of benevolent rich people to buy their newspapers. In my many conversations with people who have worked with Freeman, not one could recall seeing him read a newspaper. Alden is known for . Some people believe that local newspapers will eventually be replaced by new publications, which Coppins describes as "built from the ground-up for the digital era." If they did it right, Venetoulis said, they just might be able to line up a local, civic-minded owner for the paper. Am I going to win against capitalism in America? City budgets balloon, along with corruption and dysfunction. What threatens local newspapers now is not just digital disruption or abstract market forces. Gerry Smith. When it was over, a quarter of the newsroom was gone. . The paper had weathered a decade and a half of mismanagement and declining revenues and layoffs, and had finally achieved a kind of stability. Theyre being targeted by investors who have figured out how to get rich by strip-mining local-news outfits. Vallejo deserves better. A few weeks after the story came out, he was fired. Even as Aldens portfolio grew, Freeman rarely visited his newspapers. According to its 990s, Knight ended up making $185,000 over five years on its initial $13.4 million investment. [21], Under the acquisition plan, MediaNews Group debt fell to $165 million from about $930 million. Rapid-fire changes underway at newspapers sold to cost-slashing hedge fund Alden Global Capital have led to a profound case of the jitters at newsrooms like the New York Daily News. The pitch had a certain romantic appeal to the reporters in the room. Alden Global Capital, the hedge fund that owns the Chicago Tribune and New York Daily News, offered to buy Lee Enterprises Inc. for about $142 million, seeking a larger share of the . From the March 1914 issue: H. L. Mencken on newspaper morals, A story circulated throughout the companypossibly apocryphal, though no one could say for surethat when Freeman was informed that The Denver Post had won a Pulitzer in 2013, his first response was: Does that come with any money?. So Freeman pivoted. [4], In 2019, Alden attempted, but failed at, a hostile takeover of Gannett. Alden, which already owned one-third of . As a young man, hed studied at divinity school before taking over his fathers company, and decades later he still carried a healthy sense of noblesse oblige. The model is simple: Gut the staff, sell the real estate, jack up subscription prices, and wring as much cash as possible out of the enterprise until eventually enough readers cancel their subscriptions that the paper folds, or is reduced to a desiccated husk of its former self. New York hedge fund and U.S. newspaper consolidator Alden Global Capital LLC has made a proposal to take Lee Enterprises Inc. private in a deal that values the company at around $141 million. ", "The most feared owner in American journalism looks set to take some of its greatest assets", "Minority shareholder sues Denver Post parent and NY hedge fund over 'breaches of fiduciary duty', "What does the Chicago Tribune sale mean for the future of newsrooms?
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