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Pulitzer's Gain

Some say Pulitzer Inc.'s sale to Lee Enterprises blew in quicker than a shotgun wedding. Others saw it coming a mile away.

By Malcolm Gay 

When Michael Pulitzer announced that Pulitzer Inc. had been sold to Iowa-based Lee Enterprises, Inc., the news sounded more like a storybook wedding than a $1.46 billion business deal. "Lee and Pulitzer share similar cultures and values," Pulitzer stated in a January 30 press release. "[W]e couldn't have found a better steward to continue Pulitzer's 125-year legacy of journalistic excellence."

From that point of view, the marriage metaphor wasn't much of a stretch. Pulitzer brought to the chapel the name and storied past, while Lee was the quiet suitor, a product of good, responsible breeding. Both are newspaper-only operations whose publications concentrate heavily on local coverage. Both invest local editors with a lot of autonomy and believe the best way to grow a newspaper is to increase revenue, not starve the newsroom.

Still, news of the sale to Lee came as a shock to some, and left industry wonks scratching their heads. "So much for my prescience," marvels veteran newspaper analyst John Morton, founder of Morton Research. "Nowhere did Lee Enterprises figure."

Morton and his fellow industry-watchers could perhaps be forgiven their lack of foresight. Until the sale was announced, Lee Enterprises was a veritable unknown on the national stage, and Pulitzer brass were tight-lipped until the ink was drying on the deal. Privately, Pulitzer execs had known since at least September that a deal was in the works. But when Pulitzer president and chief executive Robert Woodworth announced to the Post-Dispatch newsroom last fall that the company had hired investment-banking firm Goldman Sachs & Co. to explore "strategic alternatives," he stopped short of saying the company was up for sale.

"[I]t is far from certain that any transaction will be reached or on what terms," Woodworth told the staff. "The company is simply exploring various possible options to enhance shareholder value."

Even if specifics were in short supply, to many outside observers the gist of Woodworth's tortured syntax was clear: He was writing the last chapter of Death of a Dynasty. Far from a fairy-tale romance, the roots of this narrative could be traced back to the 1993 death of Joseph Pulitzer III. The saga continues through the banishment of scion Joseph Pulitzer IV and reaches its denouement with the 1999 hire of Robert Woodworth, leading inexorably to the sale to Lee. (For more on the Pulitzer family, see "Pulitzer's Pain," published in last week's issue.)

"This thing was sealed up months and months before," speculates Roy Malone, who worked as an investigative reporter at the Post-Dispatch until retiring in 2000. "They knew Lee was going to buy it last fall."

In this version of Pulitzer Inc.'s final days, cash is king. Board members award executives sweetheart contracts and generous bonuses. While revenues climb, circulation drops. And amid it all, the Pulitzer family retreats from day-to-day operations, making room for outsiders to prep the company for sale.

"[Robert] Woodworth came in and did a number of things that resulted in him getting a lot of money. Then he turned around and sold the company, and the family was grateful!" says one newsroom source who asked not to be named in print. "This is a burden they no longer wanted to carry. The Pulitzers haven't for years now been players in their own organization."

Pulitzer Inc.'s final seven years have been an unalloyed economic success.

The triumph owes in no small part to a controversial move made by Michael Pulitzer in 1998. Just before stepping down as CEO, Pulitzer unloaded his company's nine television and five radio stations on Hearst-Argyle Television, Inc. The deal minted Pulitzer Inc., a pure-play newspaper chain. Equally significant, it left the company roughly $550 million in cash, and no debt.

Pulitzer then scaled back his corporate responsibilities, bringing aboard Robert Woodworth, the company's first president and CEO not to carry the family name.

"It was very smart to bring in Bob," says a former company executive who declined to be named in this story. "They wanted to bring in a professional CEO. Here's a guy who's going to run your company and make a lot of money for you.

Adds the former exec: "They definitely got what they paid for."

Woodworth had cut his teeth running papers for the Capital Cities/ABC chain. Most recently he'd worked as a vice president for newspaper giant Knight-Ridder Inc. But St. Louis was different. Woodworth now headed a company with no debt, a war chest of half a billion dollars and a clear mandate from the board of directors: Grow the company.

"When Michael Pulitzer sold his TV stations to Hearst-Argyle, we started focusing on the company," says Mario Gabelli, whose firm, Gabelli Asset Management Inc., holds an estimated 3.7 million shares of Pulitzer stock. "When Bob Woodworth came on board, it reconfirmed that this asset was not going to go down in value, but grow. That's when we started buying it."

Initially Woodworth looked outside St. Louis for acquisitions, plunking down $180 million for a group of seven Illinois community newspapers and The Pantagraph, a small daily based in Bloomington, Illinois. But he soon realized that Pulitzer's best growth opportunities were in its own backyard. When he arrived in 1999, the Post-Dispatch was generating roughly 60 percent of Pulitzer's revenue. But the paper was leaving massive advertising dollars on the table. To add insult to injury, the Post was handing over 50 cents out of every dollar of profit to the Newhouse family -- a pesky aftereffect of the company's St. Louis Agency Agreement with its old rival, the Globe-Democrat.

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