Investor group in exclusive agreement to seek PMN, sources say

A group headed by the businessman Lewis Katz and the philanthropist H.F. "Gerry" Lenfest has entered into an exclusive agreement to negotiate for the purchase of The Inquirer, the Philadelphia Daily News, and Philly.com, according to sources close to the process.

Lenfest, in an interview Wednesday, said he was asked by former Gov. Ed Rendell to take over as chairman of a group of political and corporate leaders assembled to bid on Philadelphia Media Network Inc. (PMN).

The group also now apparently includes Raymond G. Perelman, the Philadelphia philanthropist whose individual bid to buy the media outlets last month was rebuffed. His associates said Wednesday that he had signed a nondisclosure agreement, indicating he was part of an active bidding group.

Two years ago, Perelman and Lenfest were part of a group that bid unsuccessfully on the company.

An exclusivity agreement between PMN's owners and potential buyers is a strong indicator that a sale will occur, but it is no guarantee that a deal will be consummated. PMN is owned by a consortium of hedge funds and investment banks that brought the website and newspapers out of bankruptcy in 2010.

Unlike the 2010 sale, which was conducted in public view by U.S. Bankruptcy Court, the current process has been shrouded in secrecy. PMN spokesman Mark Block declined to comment Wednesday, as did a spokesman for Evercore Partners Inc., the New York investment bank managing the sale.

Two groups submitted offers for the company last week. According to sources, the Katz group's bid was favored over that of businessman Jeffrey Perelman. Jeffrey Perelman is one of Raymond Perelman's sons, but they have had a litigious public relationship.

Terms of the two offers were not disclosed. The current composition of the group of potential buyers appears to be in flux.

Lenfest said in an interview Wednesday that Rendell had invited him to join as chairman, leaving Rendell's status unclear.

"I'm sorry to be so vague," said Lenfest, 81, who built his fortune in cable television and is one of the region's most prominent philanthropists.

"I'm not trying to avoid you," he said. "I've not seen any written agreement that specifies all these terms, so I'm being cautious about any of this until I see it in writing."

He referred questions to Rendell, who declined to comment.

It is unclear what Rendell's role would be going forward since he had said he was not investing equity into the group and had earlier said he expected to be chairman.

Lenfest is a former chairman of the Philadelphia Museum of Art, and his patronage has included gifts to the Curtis Institute and the Pennsylvania Academy of the Fine Arts, which last year inaugurated Lenfest Plaza, a public space for performance and sculpture at Broad and Cherry Streets.

Katz is a lawyer who made his fortune from parking garages and real estate, and is a former owner of the New Jersey Nets. He funded construction of the Pennsylvania State University law school building that bears his name.

Other members of the group Rendell assembled included South Jersey insurance executive and Democratic leader George E. Norcross III; Liberty Property Trust chief executive William P. Hankowsky; Krishna P. "Kris" Singh, president and CEO of Holtec International in Marlton; and Comcast-Spectacor chairman Edward M. Snider.

The current status of the group was unclear Wednesday night. Snider, reached by telephone, declined to comment.

After the sales process became public in early February, two other investor groups sought to join the bidding but were turned away.

A group organized by the developer Bart Blatstein announced its interest in bidding in early February, only to be told by PMN's owners that it would not be permitted to do so. Raymond Perelman also wanted to bid, and he complained in a Feb. 8 letter addressed to PMN that he was "surprised and dismayed" at being excluded.

Typically, in an auctionlike sale, the seller chooses a preferred bidder, and the sides enter into an exclusive period of negotiation to work out the details of a sale. That period could last from 30 to 90 days.

A sale would be the fourth change of ownership for the media outlets since their longtime owner, Knight-Ridder Inc., was acquired in 2006 by the McClatchy Co.

McClatchy turned around and sold Philadelphia Newspapers Inc. for $515 million to a group headed by the advertising executive Brian P. Tierney.

Tierney's company declared bankruptcy in 2009. Lenfest and Raymond Perelman were members of a group of investors Tierney assembled in 2010 that bid unsuccessfully on the newspapers during the bankruptcy court auction.

The successful bidders - the current owners - included the hedge funds Alden Global Capital and Angelo, Gordon & Co., which had acquired discounted debt from the company's creditors. They paid $139 million for the properties.

PMN plans shrinking its newsroom staff by 37 positions, or about 10 percent of the combined unionized workforce of 360 journalists, at its two daily newspapers and the website.