Alden, which owns more than 200 newspapers across the country, has developed a reputation for using extensive layoffs and severe cost cuts at the newspapers it owns. My question was did Knight know what Alden was doing to newspapers when it invested with the hedge fund, and does it regret that investment now? After serving in the Carter administrations Treasury Department, Brian became widely knownand fearedin the 80s for his hard-line negotiating style. After college he worked at Hudson Studio, Art Foundry in Niverville, NY . Even in a declining industry, the newspapers still generated hundreds of millions of dollars in annual revenues; many of them were turning profits. But this acquisition was profound, making Alden Global . Its World War II correspondent brought firsthand news of Nazi concentration camps to American readers; its editorial page had the power to make or break political careers in Maryland. The 1% own and operate the . The papers printing was moved to a plant more than 100 miles outside town, Glidden told me, which meant that the news arriving on subscribers doorsteps each morning was often more than 24 hours old. How do you know who wins? the boy asks. Clearly, for Smith and Freeman, chop-shopping their newspapers paid off. [4], In 2019, Alden attempted, but failed at, a hostile takeover of Gannett. When the city-hall reporter left a few months later, he picked up that beat too. To find the papers current headquarters one afternoon in late June, I took a cab across town to an industrial block west of the river. I asked Knight about those investments and whether the Foundations officers had any regrets, knowing what we now do about Aldens devastating effect on its own newspapers. With its acquisition of Tribune Publishing earlier this year, Alden now controls more than 200 newspapers, including some of the countrys most famous and influential: the Chicago Tribune, The Baltimore Sun, the New York Daily News. 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. It has figured out how to make a profit by driving newspapers into the ground, he says, since Alden's aim is not to make them into long-term sustainable businesses but rather maximize profits quickly to show it has made a winning investment. He took particular pride in finding novel ways to give away his family fortune, funding child-poverty initiatives in Baltimore and prenatal care for women in Liberia. Who Profits From Alden Global Capital? A reporter at one of his newspapers suggested I try doorstepping Smithshowing up at his home unannounced to ask questions from the porch. Heath hopes the well never runs dry, but hes going to keep pumping until it does. Reading these stories now has a certain horror-movie quality: You want to somehow warn the unwitting victims of whats about to happen. . It has filed a lawsuit in its bid to buy out news publisher Lee Enterprises. But by 2014, it was becoming clear to Aldens executives that Patons approach would be difficult to monetize in the short term, according to people familiar with the firms thinking. Freeman, meanwhile, would later gloat to colleagues that Bainum was never serious about buying the newspapers and just wanted to bask in the worshipful media coverage his bid generated. This is a subscription-based business.. When it was over, a quarter of the newsroom was gone. Other records turned up from public pension funds and filings of publicly traded companies. Freeman was more animated when he turned to the prospect of extracting money from Big Tech. 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. He stops talking to the press, refuses to be photographed, and rarely appears in public. 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. By the 1980s, this strategy has made Randy luxuriously wealthyvacations in the French Riviera, a family compound outside New York Cityand he has begun to school his children on the wonders of capitalism. Of course, its easy to romanticize past eras of journalism. [2][3] By mid-2020, Alden had stakes in roughly two hundred American newspapers. 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. 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.. The pitch had a certain romantic appeal to the reporters in the room. Its not as if the Tribune is just withering on the vine despite the best efforts of the gardeners, Charlie Johnson, a former Metro reporter, told me after the latest round of buyouts this summer. At the time, even savvy media insiders like Martin Langeveld wistfully predicted Alden would keep newspapers future in mind: Smith knows that the only way to win his big bet on the future of newspapers is to turn them into nimble, modern digital news enterprises.. He studied art at Alfred University under sculptors Glenn Zweygardt and William Parry. Have you heard of the hedge fund Alden Global Capital? But beneath all the recriminations and infighting was a cruel reality: When faced with the likely decimation of the countrys largest local newspapers, most Americans didnt seem to care very much. 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. Even as Aldens portfolio grew, Freeman rarely visited his newspapers. 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. It financed the deal with the help of Cerberusa private-equity firm that owned, among other businesses, the security company that trained Saudi operatives who participated in the murder of the journalist Jamal Khashoggi. Freeman, his 41-year-old protg and the president of the firm, would be unrecognizable in most of the newsrooms he owns. City budgets balloon, along with corruption and dysfunction. My request for an interview with Smith was dismissed by his spokesperson before I finished asking. It is a subsidiary of Alden Global Capital, the New York City hedge fund that backed the purchase of and dramatic cost-cutting at more than 100 newspapers causing more than 1,000 lost jobs. In the past 15 years, more than a quarter of American newspapers have gone out of business. To replace a paper like the Sun would require a large, talented staff that covers not just government, but sports and schools and restaurants and art. Its a hedge that went and bought up some titles that it milks for cash.. Meanwhile, reporters fanned out across their respective cities in search of benevolent rich people to buy their newspapers. 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 scene was somehow even grimmer than Id imagined. He gained 100 pounds and started grinding his teeth at night. 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?. Shortly after the Tribune deal closed earlier this year, I began trying to interview the men behind Alden Capital. Like many alumni of the Sun, Simon is steeped in the papers history. His editor cited a supposed journalistic infraction (Glidden had reported the resignation of a school superintendent before an agreed-upon embargo). The Tribune had been profitable when Alden took over. So Freeman pivoted. For Baltimore to avoid a similar fate, Simon told me, something new would have to come alonga spiritual heir to the Sun: A newspaper is its contents and the people who make it. This story originally appeared on the Morning Edition live blog. Coppins describes Alden as a specific type of firm: a "vulture hedge fund." Former Knight-Ridder headquarters. The Alden Global Capital . The specific shareholder rights plan adopted by the Lee board forbids Alden from purchasing more than 10% of the company, and will be in force for one year. Many of the operators were looking at the newspaper business as a local advertising business, he said, and we didnt believe that was the right way to look at it. [30], Alden Global Capital includes a real estate division called Twenty Lake Holdings, which primarily buys excess real estate from newspapers. I asked, What is the Foundations perspective on those investments now, as news of Aldens gutting of these newspapers has come to light?. 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 . After a contentious presidential race and amid a still-raging pandemic, there was a limited supply of outrage and sympathy to spare for local reporters. A group of 11 community newspapers owned by Red Wing Publishing Co. have been sold to MediaNews Group, owner of the St. Paul Pioneer Press and more than 100 newspapers across the country. In the for-profit news arena, Knight is spurring the digital transformation of local newsrooms through the Knight-Lenfest Newsroom Initiative, Sherry said. We were like, Theyre not going to take our newspaper from us! Probably not.. Joe Pompeo pilloried Alden in Vanity Fair for reducing newsrooms. MediaNews Group came out of bankruptcy in March 2010 under the majority ownership of its lenders. 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. Freeman was only slightly more accessible. Updated May 21, 2021 at 2:13 PM ET. Tribune Publishing last month approved a $630m takeover deal with Alden Global Capital. Margaret Sullivan: The Constitution doesnt work without local news. One researcher tells me that if that money were invested in the S&P 500 Index Fund, it would have earned roughly $11 million over the same period. 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. The story of Alden Capital begins on the set of a 1960s TV game show called Dream House. In February 2021, he announced a handshake deal to buy the Sun from Alden for $65 million once it acquired Tribune Publishing. [6][7][8][9], The company operates its media holdings through Digital First Media (DFM), which it acquired in 2010 after DMG's parent company, MediaNews Group, declared bankruptcy. 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. In my many conversations with people who have worked with Freeman, not one could recall seeing him read a newspaper. He wrote, "Alden Global Capital has eliminated the jobs of scores of reporters and editors, and decimated journalism in cities all over the country: Denver, Boston, San Jose, Trenton, etc. Orders for non-defence capital goods excluding aircraft a closely watched proxy for business investment, rose 0.8 per cent in January from a month earlier, comfortably above economists . Knight began selling off its Alden holdings in 2012, and got completely out in 2014. He had spoken on this issue before, and it was easy to see why. In May 2021, Tribune Publishing finalized its sale to Alden, after having announced in February 2021 that it intended to pursue this path. At the end of last month, Alden Global Capital, a notorious newspaper-owning hedge fund, sought to stake its claim on one of the last newspaper chains it hasn't yet touched: Lee Enterprises, which owns 90 publications across the country.Alden, which currently owns six percent of Lee's stock, sent an unsolicited offer to purchase the newspaper chain for $24 per share. Aldens calculus was simple. Unless the Tribunes trajectory changes, Chicago may soon provide a grim case study. [4], Alden purchased a 5.9-percent stake in Lee Enterprises in January 2020. A vulture doesnt hold a wounded animals head underwater. The new owners did not fly to Chicago to address the staff, nor did they bother with paeans to the vital civic role of journalism. Next year, Bainum will launch The Baltimore Banner, an all-digital, nonprofit news outlet. Alden is not a newspaper company, says Ann Marie Lipinski, a former editor in chief of the Chicago Tribune. When the sale failed to attract a sufficiently high offer, Freeman turned his attention to squeezing as much cash out of the newspapers as possible. By Julie Reynolds. Inside Alden Global Capital. Already the largest shareholder . Who is investor Randall Smith and why is he buying up newspaper companies, deep losses to Alden funds overall values, Denver Post newsroom workers invoke Thirst Amendment to raise awareness about conditions under Alden, Pittsburgh newspaper workers are making history, The NewsGuild urges public pension funds to divest from Cerberus, NewsGuild to Lee Shareholders: Reject Aldens Vote No Campaign. To industry observers, Aldens brazen model set it apart even from chains like Gannett, known for its aggressive cost-cutting. [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. he asks. ", "Hedge Fund Reaches a Deal to Buy Tribune Publishing", "Opinion - Will The Chicago Tribune Be the Next Newspaper Picked to the Bone? 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. Frustrated and worn out, Glidden broke down one day last spring when a reporter from The Washington Post called. "And what we've seen in a lot of these places where newspapers have been scaled back or even closed is there really is no comparable product in place, whether it's by the government or by another news organization, to do what these local newspapers have done for hundreds of years.". The term vulture capitalism hasnt been invented yet, but Randy will come to be known as a pioneer in the field. Since Alden's . If accepted, the $24 per share purchase price would . But years later, when Randy relocates to Palm Beach and becomes a major donor to Donald Trumps presidential campaign, it will make a certain amount of sense that his earliest known media investment was conceived as a giant middle finger to the journalistic establishment. We were in collective revolt, Lillian Reed, a Sun reporter who helped organize the campaign, told me. Neither man will ever be the guest of honor at the annual dinner for the Committee to Protect Journalistsand thats probably fine by them. When hed agreed to the interview, Id expected him to say the things he was supposed to saythat the layoffs and buyouts were necessary but tragic; that he held local journalism in the highest esteem; that he felt a sacred responsibility to steer these newspapers toward a robust future. Hes impressed by their journalism, he told me, but his clearest takeaway is that theyre not nearly well funded enough. But in the case of local news, nothing comparable is ready to replace these papers when they die. but sadly on a global scale there is hardly any independent news sources left currently. And two, by at least 2013, those of us who worked at Alden-controlled papers (like me) were already experiencing the slashing and burning. Its not the name or the flag., He may get his wish. 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. Others pointed to Bainums financing partner, who pulled out of the deal at the 11th hour. A more honest argument might have claimed, as some economists have, that vulture funds like Alden play a useful role in creative destruction, dismantling outmoded businesses to make room for more innovative insurgents. On the surface, the answer might seem obvious. [8][24] Tribune Publishing publishes nine major metropolitan dailies. . But maybe the clearest illustration is in Vallejo, California, a city of about 120,000 people 30 miles north of San Francisco. Even in the greed is good climate of the era, Randy is a polarizing character on Wall Street. Im repulsed by the incestuous world of New York journalism, he tells New York magazine. Last week, Alden Global Capital, the hedge fund notorious for slashing costs at its local titles, came down on the No side of the question, with editorial boards at papers that it owns stating that they will no longer endorse candidates for governor, US senator, or president. [12] Lee owns daily newspapers in 77 markets in 26 states, and about 350 weekly and specialty publications. 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. In 2016 (year of the most recent 990 available), the foundation invested $17 million in Alden funds. 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. Alden Global Capital already owns 200 publications and a 6% stake in Lee Enterprises. They are also defined by an obsessive secrecy. Some expressed exasperation with the staff of the Chicago Tribune, who were unable to find a single interested local buyer. I put the question to Freeman, but he declined to answer on the record. Glidden, then a mild-mannered 30-year-old, had come to journalism later in life than most and was eager to prove himself. October 14, 2021. A Secretive Hedge Fund Is Gutting Newsrooms. After weeks of back-and-forth, he agreed to a phone call, but only if parts of the conversation could be on background (which is to say, I could use the information generally but not attribute it to him). That might sound like a losing formula, but these papers dont have to become sustainable businesses for Smith and Freeman to make money. "60 Minutes" correspondent Jon Wertheim did a strong piece that aired Sunday night about the grim state of local newspapers, in part because of how hedge funds, such as Alden Global Capital . It was clear that they didnt care about this being a business in the future. He can cite decades-old scoops and tell you whom they pissed off. All good works, and Knight is to be commended for them. The Tribune Tower, the iconic former home of the Chicago Tribune, seen in Chicago, Illinois in 2015. As the months passed, things kept getting worse. In budget meetings, according to the former executive, Freeman hectored local publishers, demanding that they produce detailed numbers off the top of their head and then humiliating them when they couldnt. After congratulating him on closing the deal, Bainum said he was still interested in buying the Sun if Alden was willing to negotiate. Theres no industry that I can think of more integral to a working democracy than the local-news business, he said. Enter the email address you signed up with and we'll email you a reset link. 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. . 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. 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. He said that he still appreciated their journalism, but that he couldnt speak for his corporate bosses. 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. Instead, they gutted the place. More to the point, Tribune Publishingwhich represents a substantial portion of Aldens titleswas profitable at the time of the acquisition. 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. Alden Capital's gutting of the Denver Post is the most discussed example of this, but there are many others. I would know he didnt mean it, and he would know he didnt mean it, but he would at least go through the motions. In the ensuing exodus, the paper lost the Metro columnist who had championed the occupants of a troubled public-housing complex, and the editor who maintained a homicide database that the police couldnt manipulate, and the photographer who had produced beautiful portraits of the states undocumented immigrants, and the investigative reporter whod helped expose the governors offshore shell companies. So why be surprised that Knight-Ridder or anyone else is investing in destructive but profitable ventures? hide caption. 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. Some in the industry say they wouldnt be surprised if Smith and Freeman end up becoming the biggest newspaper moguls in U.S. history. The firm has a history of purchasing newspapers to cut costs wherever . They want to know who exactly profits when we learn, as Harvard Nieman Labs Ken Doctor recently reported, that the firm netted $160 million last year from its Digital First Media newspapers. Well, he told me, they have some very good reporters., This article appears in the November 2021 print edition with the headline The Men Who Are Killing Americas Newspapers., A Secretive Hedge Fund Is Gutting Newsrooms, I Dont Know That I Would Even Call It Meth Anymore, W. G. Sebald Ransacked Jewish Lives for His Fictions. The new owners had announced a round of buyouts, some beloved staffers were leaving, and those who remained were worried about the future. The most promising prospect materialized in Baltimore, where a hotel magnate named Stewart Bainum Jr. expressed interest in the Sun. Tips that he would never have time to investigate piled up on a legal pad he kept at his desk. 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. [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. Freeman never responded. A recent Financial Times analysis found that half of all daily newspapers in the U.S. are controlled by financial firms, and Coppins says that number is all but certain to keep growing. [4] [5] The company added more newspapers to its portfolio in May 2021 when it purchased Tribune . For a fleeting moment, Aldens newspapers became unexpected darlings of the journalism industrywritten about by Poynter and Nieman Lab, endorsed by academics like Jay Rosen and Jeff Jarvis. Layout design was outsourced to freelancers in the Philippines. Craigslist killed the Classified section, Google and Facebook swallowed up the ad market, and a procession of hapless newspaper owners failed to adapt to the digital-media age, making obsolescence inevitable. California biotech billionaire and Los Angeles Times owner Patrick Soon-Shiong, who owns 24%, Most responded with variations on the same question: Which recent stories from your newspapers have you especially appreciated? This is predatory.. Lee Enterprises, the owner of daily newspapers in Winston-Salem and Greensboro, this morning rejected a hedge fund's proposal to take over the company. 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? Most of his investments are defined by a cold pragmatism, but he takes a more personal interest in the media sector. The one central theme, the Times reports, seems to be that Smith and its web of affiliates are out, first and foremost, for themselves. If this reputation bothers Randy and his colleagues, they dont let on: For a while, according to The Village Voice, his firm proudly hangs a painting of a vulture in its lobby. Reporters kept reporting, and editors kept editing, and the union kept looking for ways to put pressure on Alden. The Tribune Tower rises above the streets of downtown Chicago in a majestic snarl of Gothic spires and flying buttresses that were designed to exude power and prestige. 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. "[28], In mid-February 2022, the Delaware court found in favor of Lee Enterprises.