Newspaper union opposes plan to sell Philly papers

The soap opera around Interstate General Media, the parent company of the Philadelphia Inquirer, Daily News and their affiliated websites, continues.

Drew Katz, the son of Lewis Katz, the businessman who was killed in a plane crash days after winning control of Interstate General, announced Tuesday that he plans to selling his stake in the company.

Katz's decision comes after a local website, BigTrial.Net, reported that the 42-year-old wasn't getting along with H.F. Lenfest, the billionaire philanthropist who in May bought Interstate General with his Lewis Katz for $88 million. Though Drew Katz has said the company would be in" excellent hands" under Lenfest's ownership and denied there was a rift, officials at the Newspaper Guild of Greater Philadelphia are uneasy about Lenfest, claiming that he is anti-union and that he may choose to put profits over editorial quality.

"[We are] very worried, and we the Guild are trying to convince Drew Katz to change his mind," wrote Bill Ross, the union's executive director, in an email. "We believe he was our only hope to possibly save this enterprise. Lenfest better understand he has 12 labor unions to deal with, if he's the sole owner, and his clear dislike of unions won't be tolerated."

Ralph Cipriano, a former Inquirer reporter who broke the news about Katz on Big Trial, told CBS MoneyWatch he isn't sure whether it is too late to persuade Katz to change his mind. Lenfest, who is traveling in Europe, didn't immediately respond to a message left with his assistant. Efforts to reach Katz at his company Interstate Outdoor Advertising were unsuccessful.

The newspapers, which have changed owners six times in less than a decade, lost money in 2013. They are projected to generate earnings before interest, taxes, depreciation and amortization of $10 million this year. However, it's possible that they may lose money on a net income basis given the costs they have incurred.

Finding an investor for Interstate General with deep pockets and loads of patience won't be easy. Though Warren Buffett has acquired more than 60 papers in recent years, those serve smaller towns and cities and are less costly to run than major metropolitan dailies such as the Inquirer and Daily News.

"It is a little early to say, but you are right there is potential for a turn to the worse," said Rick Edmunds, a media business analyst with the non-profit Poynter Institute, in an email. "If a supportive buyer is found (likely), the next chapter can proceed as planned (which as we know was not planned in much detail). The problem will be if a buyer is not readily found or the stake goes to a minority owner with a different agenda. In any scenario, however, the loss of Lewis Katz's commitment and steady business judgment going forward will make a difficult situation more difficult."

The Philadelphia newspapers are one of many that have recently changed hands. Amazon.com (AMZN) founder Jeff Bezos acquired the Washington Post earlier this year for $250 million. John Henry, the principal owner of the Boston Red Sox, last year acquired the Boston Globe, Worcester Telegram & Gazette and affiliated properties for $70 million. He sold the Worcester paper to Halifax Media earlier this year.

Even as their newsroom budgets continued to shrink, the Interstate General papers have continued to break major stories. Earlier this year, the Inquirer uncovered a controversial decision by Pennsylvania Attorney General Kathleen Kane to shut down a government sting operation that caught several local lawmakers on video accepting cash payoffs from an informant. Inquirer architecture Critic Inga Saffron also won this year's Pulitzer Prize for criticism.

"Readers don't get our breadth and depth of daily and even hourly coverage from anywhere else -- not the feisty but threadbare weeklies, not the glossy magazines with their lack of substantive coverage, not the grant-dependent 'community journalism' projects that come and go, not the boosterish specialty websites or unaccountable independent bloggers or crime- and celebrity-obsessed TV sites," wrote Inquirer business columnist and reporter Joseph DiStefano, in an email.