Sun-Times parent to buy Chicago Reader for $3 million
By Lynne Marek May 09, 20121
(Crain’s) — Wrapports LLC, the parent of the Chicago Sun-Times, is poised to purchase the Chicago Reader as soon as next week for about $3 million, according to sources familiar with the transaction.
The alternative weekly is being sold by New York investment firm Atalaya Capital Management LP, which acquired it along with four other weeklies out of bankruptcy in 2009 after lending money to prior owners at Tampa, Fla.-based Creative Loafing Inc.
Wrapports CEO Tim Knight couldn’t immediately be reached for comment. Chicago Reader Publisher Alison Draper declined comment, saying she wasn’t aware of anything being “official.” The deal hasn’t closed and could still fall apart.
Brad Bulkley, the investment banker hired by Atalaya to sell the Creative Loafing papers, said in an email statement that a “deal is close, but no deal is final until it actually closes.”
Mr. Bulkley said his goals in picking a buyer were preserving the Reader and “most, if not all, employee positions.” He added: “Buyer represents this will happen.”
He also noted that “buyer has big plans here and is interested in expanding both organically and strategically.”
“The Reader will survive and thrive because it represents what so many of other media outlets have forgotten today and thus have threatened their very existence; that is, it’s all about local, local, local!” Mr. Bulkley said.
Folding the Reader into the Sun-Times newspaper group, which includes seven suburban dailies and some 30 suburban weeklies, would expand the chain’s scant coverage of the city’s arts, culture, restaurant and entertainment scene and connect it with a new category of advertisers.
“You get a ton of listings overnight” for music, theater, and the arts, said Mark Roth, a digital media and marketing consultant who previously worked for the Sun-Times after it acquired the entertainment site Centerstage, a company he had co-founded. “Music and entertainment is pretty sticky content online,” he said, referencing the publication’s ability to retain readers.
The acquisition may also give the chain a tool for attracting a younger audience and battling RedEye, Tribune Co.’s daily Chicago tabloid that targets that audience.
“The Tribune’s got RedEye and that’s a competitor with the Reader and this gives them a vehicle to go after some of those advertising dollars,” said Thomas Yoder, one of the Reader’s former owners who still has stakes in alternative papers outside Chicago.
The purchase would also give the Reader stronger backing in its battle against the city weekly Time Out Chicago. Interestingly, one of Wrapports investors is Morningstar Inc. CEO Joe Mansueto, who is majority owner of Time Out Chicago.
Like other print outlets, the Reader has been hurt by advertisers’ and readers’ shift over the past decade from print to online media. Classified advertising income, a mainstay for the Reader, was especially hard hit because the web offers myriad free alternatives for everything from renting an apartment to finding a date.
With advertising revenue for print publications shrinking and online advertising for publications rising at a much slower rate, competition for that income is fierce.
The Reader purchase would bring the Sun-Times group an established brand, a particularly valuable asset in an age of publishing start-ups, said Mike Fourcher, publisher of two local websites and a new production manager at the TribLocal consultant Journatic.
“It gets really challenging when people are fighting over a smaller and smaller market,” said Brad Flora, president and founder of the online publication Windy Citizen.
A local digital advertising network that included Mr. Flora and Mr. Fourcher’s sites folded last month because sales weren’t sufficient to pay for the operation and the network didn’t win renewed funding from the Chicago Community Trust.
There was at least one other interested potential bidder for the Reader that Mr. Bulkley declined to name.
The Reader purchase is a “reasonable low-cost opportunity to be both offensive and defensive,” says Chuck DelGrande, an investment banker with C.W. Downer & Co. in Chicago who specializes in technology and media and isn’t involved in the deal.
Wrapports purchased Sun-Times Media in December for about $23 million. A group of investors led by Merrick Ventures LLC CEO Michael Ferro came together to form Wrapports for the purpose of acquiring Sun-Times Media.
Mr. Ferro declined to comment on whether the company was buying the Reader. Another investor in Wrapports, Madison Dearborn Partners LLC Chairman John Canning, recently noted Wrapport’s interest in acquisitions on the sidelines of the CFA Institute’s conference in Chicago this week.
“This is a long-term process,” Mr. Canning said of his Sun-Times investment. (His firm didn’t make an investment). “We’re going to do some more acquisitions. We’re going to make some changes.”
He declined to comment specifically on a Reader acquisition.
Mr. Canning and Mr. Ferro had previously served on the board of the Chicago News Cooperative, an independent online news organization that folded earlier this year. At the CNC, they worked with Jim Kirk, who was managing editor there until he left last year to become chief of editorial operations at Crain’s Chicago Business. He left Crain’s last month to become editor-in-chief of the Sun-Times chain.
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