Group Puts 'Chicago Sun-Times,' Other Papers Up For Sale

By: Mark Fitzgerald Under pressure from investors -- and a perfect storm of self-inflicted wounds amid an industry turndown -- the Sun-Times Media Group (STMG) announced Monday it is "exploring strategic alternatives," including the sale of its flagship Chicago Sun-Times and about 100 Chicago-area dailies and community papers.

STMG said its board was studying alternatives including "joint ventures or strategic partnerships with third parties, and/or the sale of the Company or any or all of its assets."

Overseeing the possible auction will be a committee composed of directors Gordon Paris, Graham Savage and Raymond Seitz, who will chair the group.

"Sun-Times Media Group is very fortunate to have a solid portfolio of publications and websites that deliver the highest quality journalism to the communities we serve and great value to our advertisers," observed CEO Cyrus F. Freidheim Jr.

There was a certain inevitability to the sale, which in the past had been held up by an unknown tax liability from both the United States and Canada that amounted to "poison pill" for any buyer.

STMG was once known as Hollinger International, and headed by Conrad Black and a coterie of executives who have been convicted on federal fraud charges of pocketing phony non-compete fees from the mass sell-off of its many newspapers.

Black is to start his 6 1/2-year sentence on March 8 on charges he improperly appropriated about $3.5 million in non-compete fees from the sale of some former American Publishing Co. papers. But in 2004, a special committee of Hollinger directors issued a detailed report accusing Black and other executives of running a "corporate kleptocracy" that siphoned off more than $400 million in total. STMG is suing Black and others for $542 million.

Once Sun-Times Publisher F. David Radler resigned, his successor discovered substantial circulation fraud that necessitated the spending of millions in compensation to advertisers.

In an effort to wring $50 million from its operating expenses, STMG in recent months has laid off employees, folded and consolidated newspapers, and turned Chicago Sun-Times circulation operations over to the rival Chicago Tribune.

Last month, a minority investor, the hedge fund K Capital Management LLC, demanded a "radical restructuring" of the board, and repeated its demands for a sale. STMG is controlled by Hollinger Inc., a Toronto-based holding company created by Black that owns about 70% of the voting stock and 19% in equity.

Sun-Times stock has sunk precipitously since the Black scandal was uncovered. It traded above $13 a share in 2002. Monday, STMG (NYSE: SVN) ended the day at $1.38, down 2 cents, or 1.43%.

"The steps that we've taken in the past year are designed to make sure that this is true today and will continue into the future," said Freidheim, a corporate turnaround artist who made his reputation reviving Chiquita Brands.