Smith last fall bought a roughly 30 percent share of the Philadelphia Inquirer and the Philadelphia Daily News and the expectation was he would build on that stake.
But the owners of the Philadelphia Media Network are now in the middle of an auction to sell it for roughly $100 million, and Smith so far is on the sellers’ side of the table, showing no indication he or Alden will be a buyer, a source close to the situation said.
RANDY SMITH On the sellers’ side.
There are several suitors presently meeting with company management, and they will be asked to make binding offers in a few weeks, the source said.
Alden and other hedge funds including Angelo, Gordon bought the papers for $139 million, and in a sale would likely lose a relatively small amount of money, the source said.
Meanwhile, Smith owns a significant stake in Reader’s Digest, and this week the troubled business sold its growth engine, allrecipes.com, for $175 million so it could repay some of its loans.
Alden also owns Connecticut newspaper conglomerate Journal Register, and about 40 percent of Freedom Communications, which owns 100 mostly West Coast daily and weekly newspapers, including the Orange County Register.
Smith is also the largest shareholder in Gannett and controls MediaNews, owner of the Denver Post and San Jose Mercury News.
An Alden spokesman said, “We very strongly disagree that we have changed our commitment” to media, declining to speak further.
Alden owns a significant amount of debt of bankrupt Tribune. It’s possible that, when Tribune emerges from Chapter 11 later this year, Alden will convert its loans into equity, giving it a sizable stake and moving it even further into the newspaper business.
Long Islander Smith is a pioneer in distressed investing, buying out-of-favor assets.
“I’d guess that 50 percent of all people in the distressed-investing business were trained by him or someone that he trained or someone that they trained,” a competing distressed-investor said.
Smith in the 1980s learned the trade at Bear Stearns and then in 1985 left to form his own firm, R.D. Smith & Co.
Some of the results have not been pretty.
Alden, in February 2010, when the company was buying a significant stake in Reader’s Digest, was “misled about how the business was doing and how quickly it could take costs out,” the source close to the situation said.
A second source confirmed that Smith feels like he was sold a bill of goods.
Last year, Reader’s Digest, after emerging from bankruptcy, replaced much of the board and bounced Mary Berner as CEO. Her replacement, Tom Williams, the former CFO, lasted only five months before a board member took over and accelerated the sell-off of properties.
Alden Global, Alden Global, Philadelphia Daily News, Randy Smith, Philadelphia Media Network, the Philadelphia Inquirer, Alden