Mesirow CEO Tyree eyes Sun-Times newspaper

Chicago financier James Tyree, CEO of Mesirow Financial Inc., is assembling a group of investors to bid on Sun-Times Media Group Inc.

Mr. Tyree told Crain's Chicago Business, a sister publication of Pensions & Investments, that he has reviewed Sun-Times’ books and discussed a possible bid with CEO Jeremy Halbreich and other company executives. Though his plans are still at a “very early stage,” Mr. Tyree said he has talked with several potential co-investors, including a private-equity firm, about forming a group of four to 25 “to keep this great institution in Chicago.”

If his group takes over the company, Mr. Tyree must find a way to turn around a business that has suffered as advertisers and readers migrate to the Internet, spurring a revenue decline made worse by the recession. Sun-Times, the publisher of the Chicago Sun-Times and 58 suburban newspapers, filed for bankruptcy protection on March 31 and retained New York-based investment bank Rothschild Inc. to market its assets.

Mr. Halbreich, who took over as CEO in February after a shareholder-led ouster of prior management, said in April that a handful of potential buyers had expressed interest in the company.

“The process is just getting started,” a Sun-Times spokeswoman said, declining to comment further.

But with Sun-Times burning through $63 million in cash last year, leaving it with just $79 million as of Dec. 31, Mr. Halbreich may find it hard to get a good price.

“It would be difficult to find anyone willing to put up any amount of money for a stream of future losses,” said Mike Simonton, a credit analyst at Fitch Ratings Ltd. in Chicago.

To slash expenses, Sun-Times fired 140 people, or 6% of its workforce, in April and said it would cut compensation costs by 15%. With more cuts, the company could perhaps generate a pretax profit of $5 million, Mr. Simonton said, suggesting a top sale price of $15 million.

Mr. Tyree, who said Mesirow would not be involved in any deal, declined to say what he’d be willing to pay. But he cautioned that buyers will base their bids on data that’s not publicly available and said he expects plenty of competition. Indeed, when Copley Press Inc. sold the San Diego Union-Tribune in March to Platinum Equity LLC, the Beverly Hills, Calif.-based private-equity firm had to beat out at least six other contenders.

He wouldn’t be the first business mogul to try to save a hometown paper. In 2006, a group of local investors led by advertising executive Brian Tierney and luxury-home builder Bruce Toll bought the Philadelphia Inquirer and the Daily News from Sacramento, Calif.-based McClatchy Co., paying $562 million in the hope that they could turn them around.

But the papers filed for bankruptcy protection earlier this year, casualties of a bigger-than-expected decline in advertising revenue that also helped push the parent of the Chicago Tribune to seek bankruptcy protection in December.

With ad revenue dropping, “you can’t afford all the costs that you once did,” said Chicago-based Barrington Research Associates Inc. analyst James Goss. “Local ownership doesn’t remove the macro elements (newspapers) face.”

Mr. Tyree, 51, a longtime Sun-Times subscriber who now reads the paper online, said he’s aware of the problems facing the newspaper industry and acknowledged the need for big changes at the newspaper. The business was built to fit a much larger revenue base and “has to be reset to reflect the size business it will be,” he said, declining to discuss financial details.

But Sun-Times’ bankruptcy filing means that the company’s liabilities — the largest of which is a disputed federal tax bill for more than $600 million — won’t be part of the sale. That, said Mr. Tyree, makes it a “real opportunity.”

Ann Saphir is a reporter at Crain's Chicago Business