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Corporate Strategy

David Black, a true believer amid cries of doom Add to ...

Owning the No. 2 newspaper in a city that is large enough for only one is rarely profitable. For David Black's Honolulu Star-Bulletin, it was worse than that: Under his ownership, the paper has endured almost a decade of "substantial" losses.

It started in late 2000, when the Star-Bulletin was about to be shuttered. Mr. Black bought it for a nominal $10,000, and also purchased a weekly publication with a printing press. The Victoria-based owner of community paper publisher Black Press Ltd. was a nobody when he bought that paper, his company's first U.S. daily.

Squaring his shoulders, he aimed to take on the rival Honolulu Advertiser, 50 per cent larger and owned by Gannett Co., the largest U.S. newspaper publisher. While gains were made, profits were not. So last year Mr. Black sat down with his minority owners, a sextet of wealthy Hawaiians, and convinced them of an unlikely last move: Buy the Advertiser.

The strategy is emblematic of his belief in the newspaper business. Instead of following the lead of E.W. Scripps Co., which closed Denver's Rocky Mountain News last year; or Hearst Corp., which did the same with the Seattle Post-Intelligencer, Mr. Black decided to double down in Hawaii, sure that the industry struggles are due to severe recession and not a dead business model.

He sees Honolulu as a place where a paper can thrive - but not two, which was the rationale that led to his chase for the Advertiser. Initially rebuffed by Gannett, his offer was accepted a month ago.

"We decided we had to change the game," said Mr. Black, whose Black Press owns more than 150 publications, mostly small papers in B.C. and Washington state.

The Star-Bulletin has been put up for sale, essentially a technicality to satisfy the U.S. government. Assuming no buyers come forth, Mr. Black plans to merge the two papers and significantly cut the combined staff of 900. When he bought the Star-Bulletin a decade ago, he injected cash into the paper to better compete.

As he consolidates a losing position in Hawaii, Mr. Black (no relation to the onetime newspaper baron now jailed in Florida) pursues far grander ambitions in Canada. Black Press is one in a group of five bidders in the $1-billion-plus auction of CanWest LP's 46 newspapers, which is to be settled within a month.

While industry profits have plunged, he says large CanWest dailies such as the Vancouver Sun, National Post and Montreal Gazette will recover. Newspapers are especially interesting if assets can be had at a low price and then benefit from an improving economy.

Mr. Black is believed to be financially backed in the auction by conglomerate Platinum Equity LLC of Los Angeles, which specializes in distressed assets. A year ago, Platinum entered the newspaper industry when it bought The San Diego Union-Tribune, with Mr. Black as a consultant. After layoffs, it has reportedly been pulled out of red ink. (Later in the year, Platinum, again with Mr. Black consulting, took a failed run at The Boston Globe.) While Mr. Black is widely respected in the industry - he started more than three decades ago at age 29, when he bought the tiny Williams Lake Tribune in the B.C. Interior - he has made mistakes. In 2006, Black Press made its boldest move when it paid $165-million for The Akron Beacon Journal - ill-timed, especially given the states ever-weakening industrial economy.

Mr. Black, who has a keen eye for business details, concedes he didn't see the confluence of dark clouds. A $100-million writedown came several years after the acquisition. "It was not a smart thing to buy."

Follow on Twitter: @davidebner

 

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