As Bid For 'Chicago Defender' Stalls, Another Revs Up

By: Mark Fitzgerald In the five years since patriarch John H. Sengstacke died and left 70% of Sengstacke Enterprises in a trust that triggered federal estate tax that now stands at nearly $4 million, deal after deal to buy the Chicago Defender and its three sibling weeklies has come undone.

Now, the offer that looked better than any previous deal -- the only one that ever won the blessings of the probate court judge overseeing the trust --looks to be stalled. A closed-door status hearing this week on the $8.5 million purchase offer by Sengstacke nephew Thomas Picou ended with nothing more than a promise that all parties would return to court for another status hearing Aug. 14. Picou's Chicago-based Real Times investment group had expected to close the purchase by the end of June.

Because of a gag order imposed by Cook County Circuit Court Judge Bernetta Bush, no one is talking about what is delaying the sale of the nation's only black-oriented daily newspaper and its weeklies: the Michigan Chronicle in Detroit, the New Pittsburgh Courier, and the Tri-State Defender in Memphis, Tenn.

But the delay has invigorated a second offer for the Sengstacke papers from Ken Smikle, owner of Target Market News, a Chicago-based firm specializing in black consumer research. On Tuesday, Smikle, a newspaper industry consultant, formally proffered his proposal to the trustee for John H. Sengstacke's estate. The offer was first reported in E&P's May 6 issue.

Target Market is proposing a cash offer for 51% of the company, leaving Sengstacke family members -- whose disagreements have derailed previous offers -- with a 49% stake, and, Smikle says, "day-to-day involvement" as well. "We think the family is an asset of the Defender," he said.

Smikle proposed an immediate cash payment of up to $2 million for the majority stake and a loan of $2.5 to $3 million to pay off the estate tax. The loan would be repaid by future revenues.

Smikle portrays his offer as far more straightforward than any previously entertained by the trustee. For one thing, he notes, it does not involve purchase of Sengstacke's real estate holdings. "We also don't want to kick the family out," he said. "I think the family has to be given the right to be involved, to have some kind of self-determination in this -- and advertisers will be more at ease about the lack of volatility in that."

Smikle said his deal likely will be financed by institutional investors rather than private equity groups who have balked at critical junctures in previous deals for the papers.

Like Picou, Smikle said he believes the Defender should remain a five-day daily. "That's the distinguishing characteristic of the paper (compared to) other black papers in the market," Smikle said. "It gives advertisers something they can't get with other black print vehicles in the market."

But he says the Defender should be a different kind of daily: "Most black weeklies are like dailies that come out one day a week. They've mimicked the white dailies. We have a unique opportunity to have a black daily and perhaps treat it as a weekly that comes out five times a week."

Each day would have one or two themes, he said. "You could have business and sports on Monday to attract male readers. An emphasis on entertainment and entertaining on the weekend. Wednesday would be food and maybe lifestyle, and you could emphasize women on Thursday. Black women don't have a vehicle like that in this town."

The Defender -- which with its editorials and reporting in the early 20th century is credited with almost single-handedly setting off the "Great Migration" of African Americans out of Dixie and into the industrial cities of the North after World War I -- has in recent decades become a financial and circulation failure. In a city of 1.1 million African Americans, the Defender sells an average of only 14,629 copies daily. Chicago Tribune media writer Kathy Bergen, quoting unnamed sources close to the business, reported this week that Sengstacke Enterprises lost $1 million on revenues of $9 million in 2001.

Smikle says he will revive the Defender by borrowing management talent already in place at the company's successful weeklies, especially the Michigan Chronicle. "It's an hour away by plane and they've got tremendous management talent at all levels," he said.