WILMINGTON - Inquirer co-owner Lewis Katz testified Tuesday that he would bid at least $77 million for the newspaper's parent company, and an attorney for its largest employee union said the union's national office was prepared to do the same - if it gets to see detailed financial information about the company.
The offers emerged in a second day of hearings on how and when Interstate General Media Holdings L.L.C. will be sold. Both at least matched the $77 million starting bid that co-owner George E. Norcross III pledged on Monday if a judge orders a private auction among the current IGM owners.
Katz and co-owner H.F. "Gerry" Lenfest want Vice Chancellor Donald F. Parsons Jr. to approve a single, sealed-bid auction open to any qualified bidder - including the Newspaper Guild, which represents 478 of the approximately 1,800 employees at The Inquirer, the Philadelphia Daily News, and Philly.com.
"The Guild is a perfect example" of why the auction should be public, Katz testified. "Whether they are able to or not, giving people who have an interest in the newspapers' success an opportunity to own it, if they can - it's not only good for the community, but it might create a higher price."
The Guild's attorney said executive director Bill Ross will testify Wednesday that the Communications Workers of America national office is prepared to bid.
"Bill will testify that the Guild has multiple potential investors, including very wealthy individuals, in the Philadelphia area, and, while we are not at liberty to say their names, we can say that the Guild's parent, the CWA, is prepared to make a separate bid," attorney Lisa Lori said after the session in Delaware Chancery Court had adjourned for the day.
Lori said the financing would not come from the local union's pension fund or through salary reductions.
Parsons has said he could rule as soon as next week, a step in breaking what has been a months-long stalemate between Norcross and Katz, who together make up the management committee that makes major business decisions for IGM.
During testimony Monday, Norcross floated the $77 million figure as a starting bid for the company. He and owners Joseph Buckelew and William P. Hankowsky contend that a private auction would be quicker and less costly than Katz and Lenfest's public-auction proposal, giving stability to a troubled business.
Earlier Tuesday, testimony focused on the company's value at a time when the newspaper industry has been battered by declining numbers of readers and advertisers.
John Chachas, an investment banker who specializes in media companies and was called by Norcross' lawyers, testified that an internal sale among the existing owners would cause the least disruption to the company. He also said that a public auction would be highly unlikely to draw a significant number of bidders.
Chachas said most recent purchases of major newspapers have been by wealthy individuals who do so for their own reasons or agendas, not to make money. "There are not many financial buyers," Chachas said.
On an operating basis, IGM lost $5 million in 2012 and made $10 million last year, Chachas testified. A $77 million bid would be 10 times projected 2014 cash flow, he said.
George Loesch, IGM's senior vice president for sales and marketing, testified that the company is "in distress and at a serious breaking point," in part because of the ownership dispute. Loesch spent 28 years at Campbell Soup Co. before Norcross persuaded him in August 2012 to join IGM. He said he was shocked at the "culture" he found on the business side.
"On my first day, I could tell I inherited an organization that was dysfunctional, decimated, and disheartened," Loesch said.