Has newspaper bidding war begun?

IT APPEARS as if the auction is already underway for control of the Daily News, Inquirer and Philly.com.

Wealthy businessman Lewis Katz said in Delaware Chancery Court yesterday that he is prepared to match the $77 million that partner-turned-rival George Norcross has offered for Interstate General Media, parent company of the three media organizations.

Katz and Norcross, the co-managing partners of IGM who want to force each other out, were back in court yesterday with a small army of lawyers, seeking to convince Judge Donald F. Parsons Jr. that their respective auction plans are in the company's best interests.

George Loesch, IGM's senior vice president of sales and marketing, testified that the company is struggling to retain digital salespeople and sell advertising due to the instability created by the ongoing ownership dispute.

"This company is in distress," Loesch said. "It is at a breaking point. A serious breaking point."

But Katz, sporting a snazzy blue pinstripe suit on the witness stand, said the company has "done reasonably well," winning two Pulitzer Prizes in three years while regaining its financial footing.

Norcross' faction wants a private auction with incremental bidding that would allow Norcross and Katz to go toe-to-toe. Katz's crew wants an open auction that could attract outside bidders, but with each submitting a single sealed bid, which he said would eliminate "testosterone-fueled" bluffing.

Yesterday's testimony focused on which type of auction would command a higher selling price and more quickly settle the dispute. The courtroom burst into laughter when an attorney asked Katz about the bidding concept known as "competitive arousal" and Parsons jokingly held a sheet of paper over his own blushing face.

The Newspaper Guild, the union representing newsroom employees, is also considering bidding on the company, but it is unclear whether it can round up enough money. Guild executive director Bill Ross is expected to testify today.