‘Newspaper-killing’ Digital First Media to buy bankrupt Reading Eagle; deep job cuts expected
The family-owned Reading Eagle newspaper fell on hard times and is to be sold in bankruptcy court on Wednesday.
MediaNews Group, which eviscerates the staffs and liquidates the property of acquired newspapers, is expected to buy the bankrupt Reading Eagle for $5 million, according to court documents.
MediaNews was the lone qualified bidder for last week’s bankruptcy auction for the family-owned newspaper with 221 employees. U.S. Bankruptcy Judge Richard E. Fehling approved the sale on Wednesday. The sale should close by July 31.
The New York hedge fund that controls MediaNews, Alden Global Capital, has faced increasingly harsh criticism for its business tactics. Last Wednesday, 20 U.S. senators sent a letter to the hedge fund that controls MediaNews, saying that its “newspaper-killing model” was bad for employees, retirees and towns. Among those signing the letter was U.S. Sen. Bob Casey Jr. (D., Pa.).
Casey said on Wednesday that “I will be watching this process closely to ensure that Alden Global Capital is committed [to] this news organization, staff and community.”
MediaNews, also known as Digital First Media, is acquiring the Reading Eagle Co. as an asset purchase and does not have to retain employees or match their compensation and benefits. Digital First will hire new employees and those not rehired won’t receive severance, the Reading Eagle reported on Tuesday.
Even before Digital First Media became the lone qualified bidder last week, Reading Eagle Co. -- it includes a radio station, a weekly and an events division, in addition to the Eagle -- warned of the possibility of massive layoffs in a WARN notice filed with the state Department of Labor and Industry.
“They haven’t told us anything,” said an Eagle newsroom staffer who spoke of Digital First Media’s plans. “They are keeping everyone in the dark. People are pissed.” The staffer was not authorized to speak and asked to remain anonymous.
Some believe, the Eagle staffer said, that it would have been better for the Reading Eagle to close down and for people to realize what they lost so another buyer could step forward.
Digital First Media also is expected to shut down the Eagle-owned WEEU-AM radio station, according to the Eagle’s online story.
MediaNews was the only qualified bidder for the Reading Eagle, which has lost $2 million through March 31. Other newspapers that MediaNews has acquired out of bankruptcy include the Boston Herald and the Orange County Register in California.
With the Reading Eagle, Digital First Media now controls a cluster of local newspapers in Montgomery, Delaware, Chester and Berks Counties to share page design, content and copy editing functions as well as printing. Digital First has closed the Pottstown Mercury building because of mold and a leaking roof, and vacated the Times Herald building in Norristown. It has sold the newspaper buildings for the Delaware County Times and West Chester Daily Local.
Reading Eagle staffers expect Digital First Media to consolidate the Eagle’s printing operations into a regional plant in Exton, Chester County, even though the Eagle invested millions of dollars into new presses about a decade ago.
Peter Barbey, the Reading Eagle’s chief executive officer and one of the richest men in America, had subsidized the newspaper with $250,000 a month to keep it operating but threw in the towel in March. His family is worth billions of dollars through clothing manufacturer and marketer VF Corp.
Barbey loaned the Reading Eagle about $27 million to continue operating and prevent Santander Bank from foreclosing on a loan.
“Today’s court ruling further guarantees the Reading Eagle Co. survives for the good of the community, our employees and journalism in the Berks County region,” he was quoted as saying in an article that the Eagle posted on its website Wednesday night.
The Eagle was founded by Jesse G. Hawley and William S. Ritter in 1868 and has been owned by Hawley’s descendants since then. In the 1950s, author John Updike worked several summers as a copy boy at the Eagle and also wrote several feature articles.
The Reading Eagle is a consolation prize for Digital First Media, whose attempt at a hostile takeover for the Gannett Co. was rebuffed by Gannett shareholders last week. Many believe that Digital First Media will take another run at Gannett.