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Herald's owner to sell suburban papers; deal is put at $225m

(Correction: Because of a graphic artist's error, two lists with a Page One story Saturday about daily papers being sold by Community Newspapers Inc. to Liberty Group Publishing Inc. incorrectly included the Daily Item of Lynn. The Item is owned by Hasting & Sons Publishing and has not been sold.)

Patrick J. Purcell intends to sell his suburban newspaper holdings to an Illinois publisher for an estimated $225 million, according to publishing industry executives, a move that will create new challenges for his struggling tabloid, the Boston Herald.

The sale of Purcell's Community Newspaper Co. subsidiary to Liberty Group Publishing Inc. would be part of a $400 million deal that includes Liberty's acquisition of Enterprise NewsMedia LLC. Enterprise is the publisher of the Patriot Ledger of Quincy, the Enterprise of Brockton, and a number of South Shore weeklies.

Liberty, of Northbrook, Ill., publishes more than 270 small dailies, weeklies, and shoppers in 16 states, but none in New England.

Purcell last night confirmed the planned sale, but would not disclose the price.

Michael Gilligan, general partner at Heritage Partners, Inc., the majority owner of Enterprise NewsMedia, also declined to disclose the sale price. ''This was a good value for us," Gilligan said, ''and a good time for us to sell."

If completed, the deal would establish Liberty as a major player in suburban Boston, combining Purcell's approximately 100 weeklies and dailies west and north of Boston with Enterprise NewsMedia's holdings to the south. Community Newspaper claims a combined daily and weekly circulation of about 600,000. The Patriot Ledger and Brockton Enterprise have a combined average daily circulation of about 90,000.

The sale, however, would break up Purcell's Herald Media Inc., leaving it with the struggling Herald, which lost about $2 million last year, according to a newspaper executive who considered buying Purcell's properties. This executive said Community Newspaper generated a profit of about $20 million.

Purcell said that under the agreement with Liberty, the Herald would continue to cross-sell advertising with the suburban papers and share content. The Herald has in recent months relied on Community Newspaper reporters for suburban news following deep job cuts in the Herald newsroom.

''We're going to continue to build the Herald. It's my first love," Purcell said. ''We're going to be great."

But even with the support of the suburban papers, the Herald was facing a challenging environment, given the dominance of The Boston Globe and consolidation of major retailers, which are key newspaper advertisers, said Lou Ureneck, a professor of business and economics journalism at Boston University.

The Globe, which is owned by The New York Times Co., has an average daily circulation of about 414,000, compared with about 230,000 for the Herald, according to the most recent report of the Audit Bureau of Circulations.

''The economics are stacked against the second newspaper in any city, and particularly in this city," said Ureneck, a former deputy managing editor at the Philadelphia Inquirer.

Purcell bought the Herald in 1994 from Rupert Murdoch's News Corp., adding Community Newspaper to his holdings in 2001. He bought the group for a reported $150 million from Fidelity Investments, which had built the company by consolidating several suburban publishers.

Purcell has been looking for buyers or new investors since the fall, when three investment firms that helped finance his purchase of the suburban papers moved to cash out their remaining investments, requiring Purcell to come up with money to pay them off. Initially, Herald officials expressed confidence that they could keep Herald Media together.

But there was little interest among potential buyers in the Herald, according to publishing industry executives.

Ultimately, Purcell made a deal with a publisher specializing in small, monopoly community newspapers.

Liberty Group Publishing emerged in the late 1990s when it purchased more than 160 US papers from Hollinger International Inc., a Canadian media company. Since then, Liberty has been acquiring small-market papers. The publisher plans to change its name to GateHouse Media, the Herald reported.

Last year, Liberty was bought by a New York private equity firm, Fortress Investment Group LLC. Liberty is led by Michael Reed, who, before joining the company in January, headed up Community Newspapers Holdings Inc., an Alabama firm that has been buying small- to mid-size papers, including the Eagle-Tribune of North Andover.

Enterprise NewsMedia is also controlled by a private equity firm, Heritage Partners Inc. of Boston, which bought a majority stake for $113 million in 2003. Liberty will pay about $175 million for the Enterprise papers, according to publishing industry executives.

The Enterprise group is Heritage's only newspaper holding, according to Gilligan, the general partner.

The Patriot-Ledger has an average daily circulation of about 55,000, the Enterprise about 33,000.

Steve Bailey can be reached at bailey@globe.com. Robert Gavin can be reached at rgavin@globe.com.

 Herald's owner to sell suburban papers; deal is put at $225m (By Steve Bailey and Robert Gavin, Globe Staff, 5/6/06)
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