Ron Perelman, who has made billions buying and selling undervalued companies, on Monday unexpectedly expressed interest in bidding for Philadelphia Newspapers LLC, corporate parent of the Philadelphia Inquirer and Philadelphia Daily News.
The bid by Perelman and his father Raymond came after billionaire Ronald Burkle abruptly pulled out of the bidding process last week, which he had entered at the urging of Pennsylvania Governor Ed Rendell.
An auction of the bankrupt publisher is occurring Tuesday in New York City. Both the Perelmans and Burkle worked with local partners eager to keep the papers under the management of local businessman Brian P. Tierney.
The Philadelphia Council of Newspaper Unions issued a statement Tuesday decrying the potential for the termination of more than 4,500 employees if the secured bidders are successful.
Motivated by Civic Pride
Senior lenders, who want to fire Tierney, are also bidding for the company, as is Canadian publisher Stern Partners. In a statement, the Perelmans say their interest in the papers is motivated by civic pride.
"The Philadelphia Inquirer is a venerable institution that should continue to be owned by local interests," the family says. "The Perelmans and their partners have strong ties to the region, the schools, the hospitals and the cultural institutions of Philadelphia. They want to ensure that this great newspaper and its workforce continue to serve the people who depend on it every day."
Though he now resides in New York, Ron Perelman grew up in Philadelphia and graduated from the University of Pennsylvania and is a major contributor to the Ivy League institution. His father, 92, still lives in the city. "Ray Perelman just loves the papers," Tierney told the Inquirer. "He said, 'Just let me know if there is any way I can help.' "
As the Inquirer noted, the local investors include William A. Graham, chief executive officer of the Graham Co., a Philadelphia regional insurance broker; the Carpenters Union pension fund; philanthropist David Haas; and Bruce E. Toll, vice chairman of home builder Toll Bros. (TOL). Senior lenders include Angelo, Gordon & Co. and CIT Group (CIT), along with Alden Global Capital, the paper said.
Billionaires and Their Newspapers
Perelman is the latest in a growing number of successful businessmen, including Burkle and former General Electric (GE) CEO Jack Welch, who have toyed with the idea of buying a newspaper. Most knew nothing about the publishing business. Warren Buffett, who does know the business through his ownership of The Buffalo News and holdings of the Washington Post Co. (WPO), said last year that he wouldn't buy a newspaper "at any price."
The investor, whose best-known holding is Revlon (REV), doesn't shy away from risks and has dabbled in the media sector before. In the 1990s, Perelman battled fellow tycoon Carl Icahn for control of comic book publisher Marvel Entertainment. Isaac Perlmutter, whose Toy Biz action figure marketing company had a royalty deal with Marvel, eventually took control of the company, which sold itself for $4 billion to Disney (DIS) in January. Perelman's New World Communications produced the classic 80's TV show The Wonder Years.
If the Perelman's bid is accepted, it would represent the strangest twist in the saga of Philadelphia's newspapers. Tierney, a former public relations executive whose aggressive tactics made him many enemies among local journalists, led a team of investors that purchased the papers for $515 million.
Tierney the Optimist
Ever the optimist, Tierney invited the widow of its onetime owner, Walter Annenberg, to visit him in her husband's old office. While visiting, Lenore Annenberg noted that Tierney had situated his desk differently from her husband.
Tierney moved his desk. "I want all the good vibes, good ideas, I can get," Tierney told Philadelphia magazine.
Of course, his investment soon soured, as technology and the worst economic slowdown since the Great Depression created the biggest upheaval the industry has seen in decades. Tierney fell behind in his loan payments, forcing Philadelphia Newspapers to declare bankruptcy in February 2009. He has been trading barbs with his creditors ever since, even accusing them of secretly taping him
As the Inquirer noted, the drama continued Monday in federal court "when the local investors said another bidder, the largest holders of the company's debt, had a provision in its bid to terminate the company's workforce and require employees to reapply for their jobs."
Lawyers representing the unsecured lenders accused the publisher of being "unfair and despicable."