December 30, 2008     Reported By: Tom Porter

The weather is blamed for a lot of things in Maine - and this week it's taking at least some of the blame for delaying the sale of the state's largest newspaper group.  The recent ice storm and blizzard are cited as one factor behind yesterday's decision by a group of investors to push back until next year the sale of Blethen Newspapers, owner of the Portland Press Herald and Maine Sunday Telegram, Kennebec Journal and Central Maine Morning Sentinel.  Another factor is, not surprisingly, the sour economy.

"The credit markets are tight now and the newspaper industry is having some challenges," says Charles Cochrane, president and CEO of Blethen Maine Newspapers. He says efforts by Maine Media Investments LLC to complete the purchase by the end of 2008 failed, because the necessary financing could not be secured.  "We remain optimistic that the Maine Media Investment Group will be able to get the financing arranged with some more time."

Maine Media says it hopes to complete the purchase of the Blethen Maine papers early next year.  Spokesman Dennis Bailey says investors are talking to a number of banks and equity partners who are interested in financing the purchase.  But, he admits, it's still quite a way from being a done deal.  "It is a challenge. There's no question given the economy right now, and the state and credit being tight as it is, and just the general state of the newspaper industry, it's a challenge, there's no question about it."

Blethen, which is owned by the financially troubled Seattle Times in Washington, put its Maine newspapers up for sale last March, amid declining revenues and falling readership.  Since then there have been three rounds of layoffs. Early last month it struck a 'purchase and sale agreement' with Maine Media, but that is contingent on the financing being secured. There has been some internet speculation that the undisclosed price being offered by Maine Media may be reduced due to market conditions.
"Maine media made an offer, it was accepted, and that's still in effect. I know what your saying, I've heard people say that 'the longer it goes the more the price drops,' but we've offered what we believe is a fair price, that's been accepted and that is still the going offer at this point," says Dennis Bailey.

That's not to say that price will not go down next year, says industry analyst Ken Doctor.  And a lot of that depends on how much interest the buyer is going to be paying as market conditions worsen.  "Now what's happened is that the financing has frozen up as it has in much of the economy. So if you look at it from the buyer point of view, their costs are probably increasing due to the financing cost, and that in and of itself could prompt a renegotiation, and clearly newspaper values have continued to fall through last year, and that could be part of it as well."

The newspaper industry is suffering worse than most at the moment, say experts, stuck between the rock of the recession and the hard place of digital competition - i.e. the internet.  "The internet moves information for free while newspapers move it on ink, and newsprint and trucks and all of those things cost quite a bit of money," says Phil Meyer, a journalism professor at the University of North Carolina.

To survive, he says local newspapers everywhere have to concentrate on the one thing they do well.  "And that is report on local public affairs, with analysis, criticism and investigation that keeps local leadership honest and on its toes. If they can do that they will respected, they will get a small audience of news junkies, but that's a good audience and they can derive a sustainable income from that."

But first of all, says Meyer, they have to make it through the current economic storm.  And that, as investors here know only too well, requires a lifeline of credit.  Even with that, Maine Media says further job losses at Blethen newspapers can be expected.