For Sale p. 12

By: Mark Fitzgerald

Family tensions prompt Stauffer Communications to go on block sp.

STAUFFER COMMUNICATIONS Inc.'s decision to go on the auction block comes after a long period of family tension ? and change ? at the Topeka, Kan.-based chain.
While the announcement that Stauffer had retained investment banker Goldman, Sachs & Co. to explore a possible sale surprised even some stakeholders of the closely held company, rumors about the fate of the chain had heated up considerably in recent months.
Stauffer issued a bland statement saying the company's recent operating performance has made it attractive and this might be the time to "pursue opportunities." Executives declined to comment beyond the statement.
But rumors had persisted because the Stauffer family, for some time, has borne at least a passing resemblance to other old newspaper families ? the Binghams in Louisville, the Scripps descendants in Detroit or the
Cowleses in Des Moines ? whose companies foundered in an environment of restive second- and third-generation members and interest from nonfamily media companies.
Indeed, the seeds of a possible Stauf-fer sale may have been planted at the tail end of the great wave of takeovers of family chains that occurred during the middle and late 1980s.
In Detroit, Des Moines and Louis-ville, family members and early outside investors saw their thinly traded stock soar in value. In Des Moines, for example, the price of the local newspaper's stock rose from about $35 through the early 1980s to more than $300 when the Register & Tribune Co. was sold to Gannett Co. Inc.
During the late 1980s, investors began to run up the stock of Stauffer too. Its price increased from about $50 a share to about $175 in a fairly short time.
A few familiar faces from the take-over era emerged as Stauffer stakeholders as well.
For example: Chicago-based media owner Fred Eychaner, who was the largest nonfamily owner of Evening News Association stock in Detroit and who also was an early nonfamily shareholder in Des Moines. And Paul Kagan touted the company in his media newsletter and for a while was a significant investor.
In addition, some Stauffer family members were dissatisfied either with their roles in the company or the chain's performance.
With the Topeka Capital-Journal as its flagship, Stauffer publishes 21 daily papers and owns 11, mostly small, broadcast properties.
Before the recession hit the newspaper industry, Stauffer's newspapers were regarded as underperformers by media analysts.
For example, the firm of Veronis, Suhler & Associates in its latest communications industry report said Stauffer's 1988 operating margins were 8.6% ? well below the industry average then of 16.9%.
Activity in the stock was largely quelled by the recession and a restrictive stock agreement in which big dissident family members and nonfamily holders such as Eychaner ? who owns about 22% of the company ? committed to sell their stock only to the Stauffer family.
Interest in Stauffer heated up recently because of the approaching expiration of that agreement in May.
But many other events had taken place in the meantime.
As part of the stock agreement, Stauffer patriarch Stan Stauffer agreed to leave his post as chairman and be replaced by John Stauffer in May 1993.
Family members also agreed to look outside the company for a president and CEO.
Frank Shepherd, who joined the company in 1991 as executive vice president, was designated to become president and CEO.
Shepherd set about modernizing the company's operations, imposing new financial discipline and removing some longtime managers ? including Stauffer family members ? from their posts in the process.
Most notably, Peter Stauffer was removed as editor and publisher of the Capital-Journal and given another position in the company.
The new management style put some family members' noses out of joint, but Stauffer clearly has improved its balance sheet.
Its 1992 revenues of $82.6 million were up 3.3% compared with 1991, Veronis, Suhler said.
And its 13.7% operating margin outpaced the 1992 industry average of 11.9%, the analysts' report said.
"There's no debt to speak of. It's just sitting out there like a damn plum ready to be picked," one former manager said.
The decision to consider selling, however, took some in the industry by surprise because the chain reportedly had been shopping for medium-sized dailies.
No potential buyers emerged immediately, but a big media company, A.H. Belo Corp., Dallas, already owns about 7% of Stauffer. Belo is not a party to the restrictive stock agreement.
In an interview a couple of weeks before Stauffer's announcement, Belo CEO Mike Perry said the company, publisher of the Dallas Morning News, was "simply [a] passive investor" in Stauffer.
Contacted March 9, Perry said the company does not comment on possible corporate action.
?( As part of the stock agreement, Stauffer patriarch Stan Stauffer (above) agreed to leave his post as chairman and be replaced by John Stauffer in May 1993.) [Photo & Caption]

DATE: Sat 23-Apr-1994
PUBLICATION: Editor & Publisher
CATEGORY: Corrections
SUBJECT: Stauffer Communications Inc.
AUTHOR: Mark Fitzgerald
LOCATION: Page 12

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corrections stauffer communications inc. auction block family tension stockholders sale

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Corrections p. 10

AN ARTICLE (E&P, March 12, p. 12) about the possible sale of Stauffer Communications incorrectly identified Mike Perry of A.H. Belo Corp. in Dallas. He is chief financial officer.