Behind a billionaire’s interest in the Globe

Gores has made most of his money by taking on troubled technology and industrial companies - computer modem makers and steel distributors. But recently his investment firm, Platinum Equity, has delved into the beleaguered news business. It acquired the San Diego Union-Tribune in May and is among those bidding on The Boston Globe, whose parent, The New York Times Co., is exploring a sale of New England’s largest daily newspaper.

Platinum is known for hands-on management and for aggressive cost-cutting. So far, it’s the cost-cutting side of its work in San Diego that is drawing notice.

Platinum has replaced or laid off six of the Union-Tribune’s top eight managers since taking over, and it cut 18 percent, or 192 people, of the staff three days after the deal was completed. It has also hired consultants to monitor the productivity of reporters and editors and is looking to rent out the top two floors of the newspaper’s headquarters.

There are fewer news pages, a stand-alone Sunday opinion section has been eliminated, and some of the paper’s most seasoned journalists are gone. Newsroom staffing is about 200 employees, down from 250 at the time of the sale, and another round of layoffs is expected next week, according to an executive at the newspaper who asked not to be named because he is not authorized to speak for the company.

Many of these cutbacks were implemented or set in motion by the previous owners of the Union-Tribune, the Copley family, before the paper was sold to Platinum.

“The community has already seen such a decline that people feel it can’t become much worse,’’ said Lani Lutar, president of the San Diego County Taxpayers Association, a civic group. “They were hoping things would get better, but the recent reductions in the editorial staff and the size of the paper have been noticeable.’’

But Platinum executives talk about the purchase of the Union-Tribune as a long-term investment, one that depends on good journalism, not just lower operating costs.

“We believe the newspaper will thrive long into the future as long as we support a quality product,’’ Louis Samson, the Platinum principal who led the firm’s acquisition, said in an interview with the Union-Tribune in May. “We think the business can be run more effectively. That includes not just containing costs, but attacking revenue opportunities and maximizing the value of the brand and the assets.’’

Platinum executives said they are seeing early signs of progress. Spokesman Mark Barnhill said advertising revenue is improving. “We’re optimistic about where the Union-Tribune is headed,’’ Barnhill said.

John Morton, a media analyst in Silver Spring, Md., said private equity buyers can be at odds with newspapers’ traditional ways of operating. “They don’t come out of a newspaper culture,’’ he said. “They may or may not be sympathetic about what newspapers think they ought to do about running the paper.’’

Platinum has said it has no plans to meddle in the newspaper’s journalism and has left the paper’s editor, Karin Winner, in place.

But a controversy that arose shortly after the private equity firm took over left some in the community questioning Platinum’s temperament as a newspaper owner.

Another paper in Union-Tribune’s area, the San Diego Weekly Reader, was preparing a story in June that included details from two lawsuits that had been filed by former Platinum employees in 2006 and 2007 against the firm.

One suit was dismissed by a judge and the other was settled. Both contained salacious allegations about what they said was a culture of sexual harassment at Platinum, according to the Reader.

A lawyer for Platinum sent the weekly paper a threatening letter, which the Reader published, warning it not to publish any article that “falsely states, either directly or by implication, that my client engaged in wrongdoing’’ or face “substantial claims for defamation, giving rise to potentially astronomical damages.’’

While the Reader’s story noted how unusual it was for owners of a newspaper to threaten another newspaper over publication of a news story, Barnhill said: “We urged them to be extremely careful to ensure that they didn’t publish anything inaccurate, misleading, or defamatory. That’s a standard we would expect any news organization to adhere to, including not just our own but also those that cover us.’’

Gores (pronounced “Gore-is’’) is the son of Middle East immigrants who settled in Flint, Mich.

He went to school at Michigan State University and made his fortune, estimated at $2 billion by Forbes, by partnering with his brother in private equity investments. He formed Platinum in 1995.

Platinum employs 140 people and is investing a $2.75 billion fund raised from pensions and other large investors. It often buys pieces of large Fortune 500 companies.

It bought General Electric’s IT solutions group in 2004 but failed in its most recent effort to acquire bankrupt auto-parts maker Delphi Corp.

In the Union-Tribune deal, Platinum drove a hard bargain, according to a person close to the transaction. The firm ultimately paid about $50 million for the newspaper, according to published reports.

It has reportedly bid about $35 million for the Globe and the Worcester Telegram & Gazette and would take on $59 million in pension liabilities from the papers.

“They don’t care whether it’s a newspaper or a dairy or a gas station or a small engine manufacturer,’’ said the person close to the transaction. “They’re looking at the fundamentals of the business. If they think they can make money at a certain transaction price, they’re interested in that business.’’

While some in the news industry believe Platinum bought the Union-Tribune for its real estate, a person close to the firm suggested that the value of the property, while a big part of their thinking, serves mainly as a backstop in case the business doesn’t live up to its expectations: “That’s part of the hedging process.’’

The investors have brought in as publisher Ed Moss,who spent many years at the Akron Beacon Journal, where he sharply cut costs, while working for David Black, a prominent investor close to Platinum.

Platinum is partnering in its management of San Diego with Black, whose company, Black Press, owns daily and community newspapers.

Michael Kinsman, a former business reporter for 25 years, said he left the paper before Platinum arrived and hopes the new owners will stop the newspaper’s financial decline.

“The paper might have gone out of business and looked like it was headed that way until Platinum came in,’’ he said. “Apparently, they see a need for newspapers and the Union-Tribune, but in what form it will exist now I don’t know.’’