Last week, strangers began making visits to check out the Journal Star property. A name emerged as one of the suitors that we hadn't thought of: GateHouse Media.
Who? That's what I said. GateHouse is better known by the name it held until last summer: Liberty Publishing. In the year since its new CEO, Michael Reed, took over, the paper has purchased dozens of newspaper, had an initial public offering, moved its headquarters from Chicago to upstate New York, and changed its name.
We all know GateHouse in some form. Among the properties it already owns in Illinois are the Pekin Times and the Canton Daily Ledger. Yes, the company's typical MO is the small weekly or daily. Its bread and butter is tiny community newspapers, and it's on a buying binge that's quite spectacular.
Last summer, it paid $410 million for a massive line of newspapers in suburban Boston. Last fall, Reed took the company public. At the time, it reported debt of $558 million. The week before last, it announced it had a $960 line of credit arranged to refinace its debt and pay for still more acquisitions.
Yikes.
The Journal Star is not the typical target in some respects. GateHouse has papers in 18 states. It owns about 76 dailies, about 246 weeklies and another 109 shoppers. But GateHouse makes its money by consolidating services: human resources, health care, printing, etc. And the Journal Star has a brand new press.
GateHouse also is new at dealing with unions (the Journal Star has four unions, including ours). The Boston acquisitions were its first brush with unions.
Donna Marks, who works at the Patriot Ledger of Quincy, Mass., told me the experience has been eye-opening. GateHouse took a cluster of papers and immediately began rearranging jobs, sending everyone to other plants but the union employees. "We were the only ones left standing," she said. Everything is centralized: Ad reps sell for groups of papers, for example. Health care is a single plan, one that's self-funded by GateHouse is far more costly for the employee than what they have been used to. And the company makes the call on what's covered.
"What they try to do is one size fits all across the country. And that's just not practical," she said.
The company found out that unilateral decisions just don't fly with unions, Marks said. They are not great about sharing plans, but they are learning that the contracts have to be honored and the union informed. The CFO at her paper couldn't take the uncertainty from GateHouse and found another job. Others have left, too, and haven't been replaced. It shows in the paper, and circulation has dropped.
She's not entirely negative in her assessment of her new employer. She just wishes she knew the company's plans beyond buy, buy, buy.
A lot of us in Peoria are wondering the same thing. Many good papers have been ruined by companies that took on too much debt and then slashed the most expensive part of a community paper to save money: Local copy.
We'll keep you posted as we learn more about GateHouse and our other potential suitors.