Arkansas's Hussman Buys Chattanooga JOA Paper p.16

By: Robert Neuwirth Rejecting higher bids, McDonald sells Free Press to another family publisher

SHUNNING HIGHER BIDS and bigger chains, the Chattanooga Free Press has agreed to be purchased by WEHCO Media, the family-owned company that owns the Arkansas Democrat-Gazette. Terms were not disclosed.
Frank McDonald, president and chairman of the family-owned Free Press, founded 60 years ago by his father, said the firm had invited 13 newspaper operators to bid but ultimately accepted an offer from a company it knew well.
"We pretty much handpicked the ones we wanted to bid as being organizations that would mix pretty smoothly," he said, adding that his family "just felt like we'd be more comfortable" selling to someone the family had known for years. He took comfort in the knowledge that the Free Press would become WEHCO's second-largest paper ? and receive commensurate attention.
McDonald said the next generation of family members lacked interest in operating the newspaper.

Family Disinterest
"We've got a big family and the stock is owned by a lot of family members," McDonald said. "Not enough of them would have been that interested in taking over the paper."
Walter E. Hussman Jr., president and CEO of WEHCO, said the purchase was bittersweet for him. "When I heard they were selling, I was sort of sad," Hussman said. "Family ownership, local ownership, is a real plus."
That said, Hussman insisted that, despite being some 500 miles from his home base in Little Rock, the Chattanooga paper was a good fit with his company, which was founded in 1909 by his grandfather and today also owns four smaller Arkansas dailies, a Texas daily, a television station, two radio stations and some cable TV systems.
He said he had explored purchasing dailies that clustered better with its current holdings, but ultimately decided to concentrate on Chattanooga because it was a strong market and a powerful opportunity.
"In the end, our corporate cultures are very similar," he said. "We are both family owned and treat our employees very well, as if they were family." Hussman has asked all members of the McDonald family and all Free Press employees to stay on.
The afternoon Free Press is the leader in the joint operating agreement with the morning Chattanooga Times in Tennessee's third largest city. McDonald said the JOA was profitable for both papers.
Hussman said he was not daunted by the prospect of buying into a JOA and did not feel that owning the afternoon newspaper would be a problem, despite the long-term decline in the number and circulation of afternoon papers.

Afternoon Faith
"We would probably prefer to be in the morning field," he said, pointing out that when his family bought the Arkansas Democrat in 1974, it circulated in the p.m. cycle ? and ultimately triumphed over its once-dominant morning competitor, the Arkansas Gazette. "We were able to grow our circulation," he said. "You just have to publish a quality product that becomes a must read."
Hussman said that when he took over the Little Rock paper, he got some tutoring from Free Press founder Roy McDonald, who helped him define key strategies ? including discounted advertising rates and increased news hole ? that helped propel his paper to the top. The Gazette, by then owned by Gannett Co., closed and sold Hussman its assets in 1991.
Hussman said he was not planning any major changes in the Chattanooga operation. "The only thing you'll see is the installation of new presses, and that was already in the works," he said.
Hussman plans to continue the JOA with the Times, which is owned by the Sulzberger family, which controls the New York Times. The JOA, formed in 1980, was renewed in 1995 and expires in 2015. Hussman noted, however, that the JOA can be canceled on five years' notice by either paper.

RETAIL ROOTS
The Free Press began as an adjunct to a retail business. Roy McDonald, who in 1924 founded a grocery chain, soon found that he was distributing thousands of different fliers every week for each store. By 1933, he decided to combine the fliers into a weekly citywide shopper newspaper called the Free Press. In 1936, that shopper went daily and became a paid-circulation paper. In 1939, McDonald bought out the Chattanooga News, the other afternoon paper in town, and renamed his paper the News-Free Press.
From 1942 through 1966, the News-Free Press and Times were linked in a joint operating agreement. But, in 1966, McDonald broke free, becoming the first paper in the country to sever a JOA and attempt to go it alone. In 1980, the Times and News-Free Press re-established their JOA. Roy McDonald died in 1990. In 1993, the McDonald family paper returned to its original name.
Today, the Free Press has a daily circulation of 41,000, 108,000 Sunday. The Times sells about 41,000 papers each weekday.
New Mexico-based newspaper broker Dirks, Van Essen & Associates handled the transaction. Financing was provided by investment banks from New York. The sale is expected to close within two months.
?(Frank McDonald, above, left, pretty much handpicked Walter Hussman Jr., right, to buy the Chattanooga Free Press.) [Photo & Caption]
?(E&P Web Site: http://www.mediainfo. com) [Caption]
?(copyright: Editor & Publisher March 21,1998) [Caption]