Platinum Eyes Return From Newspaper

Platinum Equity LLC appears to have proven that newspapers can still be profitable buyout investments.

The Beverly Hills-based turnaround firm recently agreed to sell the San Diego-Union Tribune to MLIM LLC, an entity run by San Diego businessman Doug Manchester for a reported $110 million. The firm bought the struggling newspaper in 2009 for less than $50 million.

“We are very proud of what we have accomplished in San Diego and are grateful to the community for embracing our stewardship of the Union-Tribune,” said Platinum Equity’s Louis Samson, who led the deal for the firm, in a statement. “We came here at a difficult time for the newspaper industry and helped the Union-Tribune successfully transform its operations and re-invent itself by attracting terrific people and investing in their ideas and their passion.”

Platinum Equity installed a new publisher, as well as Jeff Light, an editor with a multimedia background, as editor. Under the new management, the Union-Tribune improved its printing system, focused more on local news and revamped its advertising rates to attract more revenue from smaller businesses.

The company also introduced a new pagination system, launched a daily deal program and, in August 2010, completed a total redesign of the newspaper and its Web site, signonsandiego.com. The media company also sought to diversify its customer base: Earlier this year, in an effort to attract younger readers, it bought discoversd.com, a hub of information about restaurants, nightlife and events in San Diego, and it recently launched a Spanish-language entertainment magazine.

As Buyouts detailed in a lengthy 2009 profile of Platinum’s investment, the firm had significant down-side protection in the Union-Tribune’s real estate, which alone was reportedly worth about $50 million. Essentially, the firm was in a position where it could make a premium return if it turned the Union-Tribune around, and wouldn’t lose much, if anything, if the deal failed. Platinum basically bought the paper time to implement strategic changes and get the profitable, if not hugely profitable, to make a decent return. Platinum Equity, however, declined to discuss what its return will be when the deal closes, which is expected to occur no later than Dec. 15.

“We’re buying time for this paper to figure this out, to crack the code in the changing paradigm,” Mark Barnhill, principal, told Buyouts in 2009.

As a result of these initiatives, the Union-Tribune expanded its readership and improved its financial performance, the company said in a statement, though neither it nor Platinum Equity provided specifics. In October, the newspaper’s circulation was up 3 percent daily and 4 percent on Sunday over the previous year, according to signonsandiego.com.

Although the Union-Tribune might be profitable again, it is still hardly a shade of what it once was. As recently as 2004, the company generated $100 million in EBITDA. The company is now generating about one-third of its peak profitability, according to sister Web site peHub.

The firm should bolster Platinum’s effort to raise its next fund. The firm, founded by billionaire Tom Gores, is reportedly seeking $3.75 billion.