Broker to Buy Honolulu Star-Bulletin p.

By: George Garneau

Gannett deal with Rupert Phillips paves way for chain to take over morning Honolulu Advertiser sp.

GANNETT CO. INC., in a key step to taking over the morning Honolulu Advertiser, has found a buyer for its waning afternoon Honolulu Star-Bulletin.
The terms of the deal with Destin, Fla.-based newspaper publisher and broker Rupert Phillips were not disclosed when the deal was announced Jan. 7.
Last September Gannett announced an agreement to buy the dominant Advertiser from Persis Corp. for $250 million. But to comply with antitrust law, Gannett needed to sell the Star-News.
The deal was being reviewed by the U.S. Department of Justice.
Gannett expects its transactions with Persis and Phillips will be complete by the end of January.
Both papers are produced and distributed under a joint operating agreement by the Hawaii Newspaper Agency, which is owned by Gannett and Persis and controlled by Gannett. Under a government-sanctioned suspension of antitrust law designed to preserve newspapers, the papers compete for readers but the agency divides up the market and shares the profits.
Gannett is buying into the growing morning market and selling the shrinking afternoon market. Since the JOA was formed in 1962, the Star-Bulletin slipped from 104,000 daily to 88,000, and the Advertiser grew from 70,000 to 105,000.
The Star-Bulletin will be the largest of what will be Phillips' 13 dailies and will give the Alabama-born publisher an unknown share of the profits through the year 2012. Analysts believe it will be less than the 40% Persis gets from its minority share.
Gannett, which acquired the Star-Bulletin in 1971, has said it will take full control of the Sunday edition, which is jointly published as the Star-Bulletin & Advertiser.
Sunday editions earn a disproportionately large share of profits at most newspapers.
According to press accounts, Phillips said he is prohibited from selling the paper for 20 years and indicated that he would not change much at the Star-Bulletin, whose newsroom staff of 90 produces a paper selling 88,000 copies six days a week.
"If it ain't broke, don't fix it," he told the staff there.
Phillips, 48, who has compiled a mixed record in recent years, is buying the Star-Bulletin through Liberty Newspaper Limited Partnership, in which his Florida consultancy and brokerage, Phillips Media Service, is the general partner.
Phillips did not return phone calls and nobody else at the company was available for comment. Phillips is one of the few U.S. newspaper brokers to be active owning and operating papers. His current stable of 12 small dailies and 14 weeklies is owned by at least two holding companies.
Dailies include the 5,000-circulation Hope Star in Arkansas, 7,600-circulation Sturgis Journal in Michigan, 6,400-circulation Coffeyville Journal in Kansas, 11,000-circulation Fremont Tribune in Nebraska, and the largest Spanish-language paper in New York, the 69,000-circulation El Diario/La Prensa.
Press accounts said Phillips started buying newspapers when he was 30 and acquired the weekly Mountain Echo in Yellville, Ark., where he had been publisher. He expanded quietly in Arkansas and elsewhere.
The Star-Bulletin will be his third acquisition from Gannett. With other investors, he bought El Diario from Gannett in 1989, and his Newsco Inc. in 1991 bought the money-losing Journal Newspapers in suburban Washington, D.C., from Gannett. Like the Star-Bulletin, the Journal had to be sold to comply with antitrust law because Gannett owns WUSA-TV in Washington.
Phillips immediately slashed about 100 news staffers, about half the staff, from the five Springfield, Va.-based Journal papers and 11 weeklies. In a press release, he boasted that the papers earned a profit in the first six months of 1992, compared with a loss of $1.5 million the year before and losses since the late 1980s.
At El Diaro a cash shortage last year forced the publisher to ask employees to wait for their paychecks.
Also last year, a civil court settlement in Shalimar, Fla., awarded control of another Phillips holding company, Hometown Communications Inc., to an investor group that had sued Phillips and other executives for breach of contract. Two Atlanta-based groups, after investing more than $3 million in Hometown to pay off debts, accused the Phillips group of violating terms of their investment. The settlement ended Hometown's Chapter 11 bankruptcy filing.
Star-Bulletin publisher Arlene Lum is to be replaced by executive editor John Flanagan.