Fortress/GateHouse empire grows while employees suffer

The Fortress Investment Group LLC remains committed to publishing newspapers and operating websites in mid-sized markets and smaller communities.

Fortress is the majority owner of GateHouse Media. And today Fortress announced the purchase of the Dow Jones Local Media Group of eight daily newspapers, 15 weekly newspapers and various niche publications through an affiliate company.

On one hand, this is good news for GateHouse employees at newspapers like the Rockford Register Star and Freeport Journal Standard. GateHouse CEO Michael Reed and his management team remain bullish on the business of journalism. The Dow Jones properties fit snugly with the GateHouse properties, particularly in New England and upstate New York. GateHouse has coveted these properties for some time.

On the other hand, GateHouse employees have endured eternal wage freezes while their parent company tried to execute a massive financial reorganization. While many GateHouse properties have remained profitable — thanks, in part, to massive payroll slashing — the chain is burdened with more than $1 billion in debt.

That explains why it may not last much longer in its current form — and why the Dow jones chain wasn’t just rolled into the GateHouse chain.

Here is how Reed described the Dow Jones purchase in a memo to employees:

News Corp announced today that it has sold its Dow Jones Local Media Group. The purchase was made by an affiliate of Fortress Investment Group LLC. Fortress is also the majority owner of GateHouse Media and has engaged GateHouse Media to provide management services for the properties.

Beginning today, GateHouse Media will manage 33 Local Media Group (LMG) publications, including 8 daily newspapers and 15 weekly newspapers in 7 states. The daily newspaper franchises included in the sale are Ashland Daily Tidings in Oregon; Cape Cod Times of Barnstable, MA; Mail Tribune of Oregon; Pocono Record of Stroudsburg, PA; The Portsmouth Herald of Portsmouth, NH; The Record of Stockton, CA; The Standard-Times of New Bedford, MA; and Times Herald-Record of Middletown, NY.

Coinciding with today’s announcement, GateHouse Media will have a senior executive at each LMG daily newspaper office either today or tomorrow, as we thought it would be timely to have some of our senior staff members visit the properties and meet employees.

We are pleased to announce that Bernie Szachara has been named General Manager of LMG, and will report to Kirk Davis, President and Chief Operating Officer of GateHouse Media. Bernie is an accomplished media executive who spent the bulk of the past 10+ years working in information technology, production, digital product development, strategy, and revenue diversification. Specifically, Bernie’s most recent work involved independently consulting for FTI Consulting, a business advisory firm, and more importantly, serving as Executive Vice- President/Strategic Initiatives, Operations and IT for The Denver Post. Prior to Denver, Bernie spent 20 years with Gannett in senior operations and IT roles. He received his BS in Production Management from Rochester Institute of Technology (RIT), and his MBA in Business/Commerce from RIT as well.

We look forward to working closely with LMG’s publishers and sharing ideas across both companies. The properties that comprise LMG are highly respected. Moreover, the management teams from both companies share a common belief that the future for local media holds much promise.

GateHouse executives have been optimistic about its reorganization, stirring speculation the debt-saddled company could go into acquisition mode. In March, the Wall Street Journal reported that Fortress could add to its GateHouse pile:

Fortress, which bought the Fairport, N.Y., company in June 2005 for more than $500 million, is also a significant creditor. The private-equity firm holds roughly $400 million of GateHouse’s debt and plans to forgive it for new stock and keep significant control over the company.

The size of Fortress’s debt holdings give it large sway in directing how GateHouse restructures its debt. After any restructuring, Fortress is mulling restoring dividends for itself and other shareholders, as well as acquiring additional media companies, the people said.

To nobody’s surprise, the dismissal of redundant managers has already begun on GateHouse’s watch.

Earlier, GateHouse decided to move its two design houses — including one located in the Register Star building — to Austin, Texas. The company is eager to load up on University of Texas journalism students for entry-level jobs.

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