21st Century Chain Ready To Expand

By: Lucia Moses

Frank H. Shepherd loves Michigan, and the feeling seems mutual. He launched his 21st Century Newspapers Inc. in 1997 by buying not one but three Detroit-area dailies in one day. One of the few active private buyers in a year of sparse merger-and-acquisition activity, he made two more purchases for about $100 million this year.

Shepherd’s Pontiac-based daily, weekly, and shopper group now reaches some 1.7 million households each week and 70% of the counties in Michigan, including some of the state’s richest. Of the 88 publications, four are dailies, with an average weekday circulation of 145,000.

He expects same-property revenue to grow in the low single digits this year, to about $200 million.

Now he’s itching to do more deals — and not just in Michigan. “We’ll go outside the state. Absolutely,” Shepherd said during a recent New York visit to meet with his backers, Goldman Sachs Capital Partners II and Kelso & Co. He’s also interested in owning TV stations in his print markets when federal media cross-ownership are changed, probably next year, and isn’t ruling out an eventual merger.

But will growth come so easily outside Michigan? Once he leaves his existing market, the odds of bidding successfully on a daily in a growth market will be tougher.

“The hardest is to leapfrog into another market,” admitted Shepherd, who’s tried to buy papers as far away as Florida and Massachusetts.

For now, though, Michigan has been good to Shepherd. Oakland County, north of Detroit, home to two of his dailies, is the state’s wealthiest, with household income averaging around $92,000. The Detroit dailies’ long strike helped his suburban dailies make inroads with readers and advertisers.

Shepherd has leveraged his geographic reach through his Gorilla Newspaper Network, a regional and national ad sales force, which coordinates sales across the group. The network will account for about a third of total revenue this year.

Other publishers now let 21st Century do their selling for them, providing additional revenue. The biggest of them is Livonia, Mich.-based HomeTown Communications Network Inc., a mostly weekly group serving Michigan, Kentucky, and Ohio.

The simplified sales approach has brought in new ad dollars for HomeTown’s Detroit-area papers, HomeTown President Richard Aginian said. “When you make it easier for the advertiser, they’re going
to buy you.”

Alarmed about the sharp falloff in help-wanted ad revenue last year, Shepherd has lately focused on ways to make up the difference with other print products. His strategy, in sum, is “to be the revenue gorilla wherever we’re at.”

To that end, he started a direct-mail business after partnership talks with Advo failed. (“They wanted too much of a bite, and too high a rate,” he said.) And his purchase of The Morning Sun in Mount Pleasant and its production plant this year will enable 21st Century to expand into commercial printing.

But things almost went quite differently for Shepherd. Retired as president of Stauffer Communications after its purchase by Morris Communications Corp. in 1994, he snapped up The Oakland Press in Pontiac, The Daily Tribune in Royal Oak, and The Macomb Daily in Mount Clemens three years later.

But in 1999, his wife, Beth, was diagnosed with breast cancer. Shepherd, who had been commuting 260 miles from Detroit to home in Charlevoix, put the company up for sale so he could devote himself to her. “I didn’t know where I was going. All I knew was, I didn’t want the [business] responsibility any more,” he said.

A few months later, however, Beth recovered, and encouraged him to take the company off the market.

Shepherd, 60, thinks the experience made him more humble, and probably a nicer negotiator, “because I realize … I’m no more important than the … next person.” Now there’s a quality that can’t hurt him at the bidding table.

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