I smell a rat...

While this looks like good news for the Citizen, it seems pretty fishy to me. 

The Tucson Citizen will be published on a day-to-day basis while negotiations are completed with two interested buyers, according to an executive with the Citizen's corporate owner.

For one thing, maintaining a job "day-to-day" would be pretty miserable.  But the worst thing that could happen to the Citizen staff would be for Gannett to sell what's left of the paper to a weak third party that wouldn't be able to produce a viable paper...or ultimately pay the pension fund and other liabilities that Gannett would have had to cover in the event of closure. 

Since the Joint Operating Agreement is not being sold with the Citizen, a new buyer will have a very difficult time getting the paper to market, and if the paper is losing money for Gannett despite the ability to share overhead with the Star, how can someone expect to make a profit running the Citizen as a stand alone entity?

How much market value could a money-losing afternoon daily command?  Add in the pension liabilities and fixed overhead and it's clear that the Citizen is a net liability.  Gannett would litterally have to pay someone to take it. 

By way of comparison, Lee Enterprises--which owns the Star--has a total market capitalization of just $13 million dollars.  So for under $7 million you could buy a controlling interest in the Star, plus every other paper in the Lee Enterprises portfolio.

Selling to a weak third party that assumes the Citizen's liabilities and then goes under would be a great deal for Gannett, in fact, it  could save the company millions of dollars.   But it would be unbelievably Machiavellian and totally unconsionable...even for Gannett. 

Comments

[Michel Marizco]

One of the rumors being circulated here is that the buyer will take the paper online only. It makes sense in many ways. It would separate the new Citizen from the JOA and eliminate the need to buy new printing presses and delivery systems.
Considering that InDenverTimes.com has private backers, I think it's very feasible that someone will make a move on an online-only news Web site. The question is, who the hell would want to buy the Citizen name? This is not the Rocky Mountain News we're talking about here.

[Peeves]

It also would be totally unconscionable to sell the Citizen to the Dandy Dime and then skip out on employees' severance pay. Or to deny severance to employees who planned to start a new job next week (thinking the Citizen would close Saturday) ... Nah, Gannett would NEVER do that.

[Bill]

It could be even worse. Gannett could sell the paper to a buyer who uses the reporters' pension plan money. That's what happened when Sam Zell bought the Tribune papers. See:
http://www.businessinsider.com/2008/12/how-sam-zell-and-tribune-management-screwed-employees

and

http://www.nytimes.com/2008/12/09/business/media/09sorkin.html?_r=1&ref=business

[BobH]

I was surprised when I saw this news item. It was together with the report that the San Diego paper was sold. SD was a bit of a pleasant surprise (anybody buying a paper right now is a surprise), but the Citizen is a shocker.

It may be one of those deals where the "seller" pays somebody to take it off his hands. That's pretty much what Hearst did with the SF Examiner when they wanted to buy the Chronicle a few years back. (How'd that work out?)