Sale of Gazette-Mail to HD Media could be done by end of month

By Chris Dickerson | Mar 9, 2018

CHARLESTON – The parent company of The Herald-Dispatch also now owns the Charleston Gazette-Mail.

U.S. Bankruptcy Judge Frank Volk on Friday approved the sale to HD Media LLC. Officials involved in the sale said they hope to complete the process by the end of March.

Wheeling-based Ogden Newspapers, which was the only known potential buyer of Charleston Newspapers until earlier this week, withdrew its bid before the March 8 auction, meaning HD Media – which publishes the Huntington daily newspaper as well as several other smaller papers across southern West Virginia – became the new owner with a bid of just under $11.5 million.

Ogden already had filed to buy the company and made a bid. On Jan. 30, Wheeling Newspapers, a company created by Ogden Newspapers to purchase the Gazette-Mail, bid $10.911 million, according to court documents. But HD Media filed documents March 6 in U.S. Bankruptcy Court for the Southern District of West Virginia to become a qualified bidder for the Charleston Gazette-Mail. March 6 was the final day interested parties could file as interested parties and make bids.

Charleston Newspapers had printed The Herald-Dispatch for several years, and it prints all of the other HD Media products. Buying the company would mean HD Media no longer needs to pay for those services.

“We’re really excited,” Doug Reynolds, managing partner of HD Media, told Hoppy Kercheval on MetroNews’ Talkline radio program, Thursday morning. “It represents a new chapter and a new day and a new sense of cooperation between Charleston and Huntington. It will mean a superior news product in all of our media markets.”

Tuesday was the deadline for bids. An auction was scheduled for Thursday, but that apparently isn’t required now. A hearing is scheduled for Friday to approve and finalize the purchase.

Reynolds, a former House of Delegates member who also ran for state Attorney General in 2016, said he doesn’t expect substantial layoffs.

Thomas Gilpin, an attorney representing HD Media, also said that during Friday’s hearing with Volk, noting that “not everybody, but most people” would retain their jobs at the Gazette-Mail. He said employee evaluations will begin soon.

Volk also approved a motion creating a “Key Employees Incentive Plan” for Gazette-Mail employees identified as “key employees.” Those nine employees would receive a bonus equal to 25 percent of their annual salary in exchange for staying at the newspaper until the close of the sale.

On Jan. 29, Charleston Newspapers said it was filing bankruptcy and that the Wheeling company owned by the Nutting family was the highest bidder. Ogden owns dozens of newspapers across the country, including ones in Wheeling, Parkersburg, Elkins and Martinsburg.

The bankruptcy court filings show that Charleston Newspapers has more than $31 million in liabilities. The biggest of those is $15.6 million owed to United Bank from a loan it took out in 2006. Charleston Newspapers also owes more than $12 million to the Pension Benefit Guaranty Corporation, a federal agency that guarantees retirement plans. Also, the paper owes $3.8 million to the former owners of the Charleston Daily Mail because of an arbitration award handed down last year.

The court filings show the buyer of Charleston Newspapers will agree to provide non-compete payments to the owners of the Gazette-Mail. That includes $150,000 each to Charleston Newspapers president and CFO Trip Shumate, $150,000 to publisher Susan Chilton Shumate and $50,000 to former publisher and president Betty Chilton. Those three also would be prohibited from competing with the Gazette-Mail for two years after the sale.

The documents also show that Charleston Newspapers brought in $19.5 million in revenue and $1.5 million in earnings in 2017 before interest and taxes.

On Jan. 29, Charleston Newspapers employees were issued WARN notices of potential layoffs. A Worker Adjustment and Retraining Notification Act notice is required when potential layoffs could exceed 50. Charleston Newspapers currently employees a little more than 200 employees.

Ogden could decide to maintain current employees, but it remains unknown and Charleston Newspapers issued the notices under their attorneys’ advice.

Now that Charleston Newspapers has filed Chapter 11, it has started a two-month countdown until new ownership could take over. Also, there is a 30-day window in which other potential buyers could come forward to make offers.

In January, a federal judge upheld a $3.8 million arbitration ruling against the Charleston Gazette-Mail.

U.S. District Judge Thomas Johnston granted the petitioner’s petition to confirm the arbitrator’s award and denied the respondent’s motion to vacate the arbitrator’s award Jan. 19.

The newspaper filed a motion to vacate the arbitrator’s award Sept. 21 in the U.S. District Court for the Southern District of West Virginia.

MediaNews Group Inc. — the former owner of the Charleston Daily Mail — said it did not consent to the combination of Charleston’s two daily newspapers two years ago and that it is entitled to back-payments, plus payments of an annual management fee until the year 2024.

The company also claims was sold without consent.

Edward D. McDevitt, the arbitrator, ruled in MediaNews’ favor.

In the newspaper’s Sept. 21 response, the attorneys claim that the domain name sale and the combination of two newspapers were a financial necessity — that default on its loan with United Bank was at hand and that bankruptcy would have been necessary if two newspapers had continued operating into the next year.

The arbitration order says the Daily Gazette Company and the Daily Gazette Holding Company LLC, the companies that run Charleston Newspapers and the Charleston Gazette-Mail, must pay MediaNews Group Inc. and Charleston Publishing Company, the former owners of the former Charleston Daily Mail, $3,795,000 plus post-judgment interest for three primary claims the former publishers of the Daily Mail had made.

Although the Daily Mail’s and Gazette’s joint business operations were known as Charleston Newspapers, the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail.

Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.

The Chilton family has owned a Charleston newspaper since 1907, when the family of Charleston politician, lawyer and business William E. Chilton bought the city’s Daily Gazette and renamed it the Charleston Gazette.

Chilton became publisher of the newspaper in 1917, after he lost his re-election bid to the U.S. Senate.

Chilton’s son, W.E. Chilton II, and grandson, W.E. “Ned” Chilton III, also served as publisher. Ned Chilton ran the paper from 1961 until his death in 1987.

Although the Daily Mail’s and Gazette’s joint business operations were known as “Charleston Newspapers,” the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail. Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.

In 2007, the Justice Department filed a suit alleging the Daily Gazette Company “planned to deliberately transform a financially healthy and stable Daily Mail into a failing newspaper and close it.”

Weeks after the merger of the Gazette and Daily Mail into the Gazette-Mail was announced in 2015, West Virginia Attorney General Patrick Morrisey's Consumer Protection Division said it investigating Charleston Newspapers for violations of state antitrust laws.

Months later, Putnam Circuit Judge Philip Stowers threw out Morrisey's attempt to force the newspaper to produce large numbers of documents about the merger.

On Oct. 6, 2015, the previous owner of the Daily Mail, the MediaNews Group, filed suit in the Delaware Court of Chancery against the Gazette's owners, seeking to recover unpaid management fees, future management fees if the Daily Mail had continued publishing and money the Daily Gazette received for the sale of the domain name.

Daily Gazette had this case dismissed based on the joint operating agreement’s arbitration clause, and the matter currently is in arbitration.

Also last year, MediaNews filed another suit against United Bank, saying it wrongfully induced CN to sell the rights to the domain name to the London newspaper. MediaNews seeks $1 million the bank received from that sale. In that complaint, MediaNews says it learned of the United Bank issue during discovery of the lawsuit currently in arbitration.

HD Media was formed in 2013 specifically to buy The Herald-Dispatch from Champion Industries, which had owned the newspaper since 2007. Its managing member is Doug Reynolds, who ran for West Virginia Attorney General in 2016. HD Media also has purchased the Wayne County News, The Logan Banner, Williamson Daily News, the Coal Valley News in Madison and the Independent Herald in Pineville.

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