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By TUX TURKEL
Portland Press Herald 11/13/2008

An investment group that includes principals who are well-known in Maine has signed a purchase agreement to buy the state's largest newspaper company by year's end, pending the completion of financing.

Maine Media Investment LLC signed the document Tuesday with MaineToday Media, Inc., which owns the Portland Press Herald/ Maine Sunday Telegram, the Kennebec Journal in Augusta and the Morning Sentinel in Waterville, and other media products in the state.

Both sides announced the sale late Wednesday. Each declined to disclose the price or other terms of the agreement.

The deal comes eight months after The Seattle Times Co., parent company of Blethen, announced plans to sell its Maine media holdings. Blethen said in July that it had signed a letter of intent to sell to Maine Media Investment, and the parties have been in varying degrees of talks since then.

The two sides reached an agreement during what's widely considered the worst economic downturn in a generation. Credit is tight, and the plunge in consumer spending has eroded the retail advertising that media companies depend on for revenue.

Crimped cash flow has been notably hard on publishers with high debt loads, which burden The Seattle Times Co. and some other media companies. Earlier this week, the Journal Register Co. said it plans to close as many as 13 newspapers it owns in Connecticut, if a buyer can't be found.

Even so, Blethen Maine and Maine Media said they are hopeful.

"Although the sale is still contingent on the buyer obtaining a portion of its financing, both parties are optimistic that the transaction will close, despite tight credit markets," said Charles Cochrane, president and chief executive officer of MaineToday Media, Inc..

Cochrane said he doesn't anticipate more layoffs or changes to the Blethen newspapers before the year's end. The papers have cut jobs, closed bureaus and trimmed expenses throughout 2008.

Maine Media includes former Secretary of Defense and U.S. Sen. William S. Cohen and two longtime business associates, Robert Baldacci and Michael Liberty.

The senior operating partner is Richard Connor, a Bangor native who is editor and publisher of The Times Leader in Wilkes-Barre, Pa.

In an interview Wednesday, Connor said it's too early to speculate about what changes the new owners might make to staffing, operations or production.

"Until I'm inside the building every day, I can only guess what we might do differently," he said.

Connor said he and Cochrane decided Tuesday to announce the sale agreement to get ahead of persistent public rumors about the status of the protracted talks.

The timing of the announcement isn't linked to efforts to complete financing arrangements, he said, which will be a combination of bank loans and private equity sources.

"This is probably the most difficult time in the last 40 years to borrow or raise money," Connor said. "We've taken on a pretty big task."

Outside observers agreed that finding credit isn't a small obstacle.

"The deal could fall apart, unless they have their financing lined up," said Jennifer Saba, associate editor of Editor & Publisher magazine. "The fact that they don't have their financing is a red flag for me."

One incentive to move forward before year's end, Saba said, is pending arbitration between Blethen and the Portland Newspaper Guild, the union that represents about 350 workers at the Portland and Waterville newspapers.

The company sued the guild in federal court over the union's contention that a buyer would have to honor the terms of its existing labor contract.

The judge suggested that the two sides resolve their dispute through arbitration, which is scheduled for Jan. 13. That proceeding will be moot if the sale takes place.

Guild leadership has had ongoing discussions with Connor, and some agreements have been reached, said Tom Bell, a Press Herald reporter who is the guild's president.

The full membership must vote on any changes before the sale can go through, Bell said – something that's likely to happen in coming weeks.

Maine Media has a long-range plan to invest in the newspapers, Bell said, but "significant layoffs" are likely in the short run.

"It's going to be a painful year, but we believe this group is the best choice for our members and the community," Bell said.

The Portland newspaper has a total of 361 full- and part-time employees; MaineToday.com has 14; the central Maine papers have 191; and there are 14 in other ventures.

The deteriorating economic environment for newspapers has led some industry observers to suggest that the pending sale between Blethen and the Connor group might mark a low point in media values.

Blethen is a private company and does not disclose sale prices. Connor declined Wednesday to discuss money, but said, "We wouldn't be here unless both sides agreed on a price we both thought was fair."

Connor also stressed that he believes in the future of the newspaper industry, and in the Maine newspapers in particular, despite the economic challenges ahead.

"Our focus is getting to the finish line by the end of the year," he said.

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

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