Regular readers of the St. Louis Post-Dispatch may be forgiven if they missed the most interesting tidbit leading up to the sale of Pulitzer Inc. to Lee Enterprises Inc. The juicy nugget was nestled in an earnings report on page two of the Business section on January 25 -- five days before the $1.46-billion purchase announcement.
Headlined "Pulitzer strategy cost drags on its earnings," business writer Christopher Carey's story failed to lead with the real news: that an influential group of Post-Dispatch editors and reporters had launched an eleventh-hour effort to buy Pulitzer Inc. through an employee stock ownership plan, known in the trade as an ESOP. Rather than quote his Post colleagues, Carey bolstered his story with a snippet of a "statement" from the ESOP cadre.
Dismissed by many as a last-ditch, pie-in-the-sky effort to maintain the paper's 127-year history of independence, the ESOP is worthy of post-mortem review if only for the odd manner in which it was born and reported.
The idea was first brought forward by a retired businessman who is a friend of several members of the six-person ESOP group, which consisted of deputy editorial page editor Bill Freivogel; his wife Margaret, the Post's Sunday editor; Washington bureau chief Jon Sawyer; senior financial writer David Nicklaus; reporter and former St. Louis Newspaper Guild president Tim O'Neil; and assistant metro editor-at-large Robert Duffy. Discussed in jest following the November announcement that Pulitzer was considering a sale, the effort sprang to life on the afternoon of New Year's Eve, when the incipient ESOP group huddled with the attorney at the Freivogels' Kirkwood home.
After the meeting, the group sought the counsel of Joe Schlafly, an investment banker at the downtown brokerage house of Stifel, Nicolaus & Co. Inc. With Schlafly's help (supplied pro bono), the group later lined up tentative financing through National City Bank.
On January 15, the ESOP hopefuls sent a request to Pulitzer's board of directors and to Goldman Sachs & Co., the company's investment banker, requesting detailed financial data necessary to make a bid for the firm, one of the smallest publicly traded newspaper chains in the nation. The group never gained access to the books.
Ten days later, the Post-Dispatch broke news of the existence of the ESOP group.
Author Christopher Carey says he'd heard talk of the ESOP plan for some time but he and his editors didn't feel it merited mention in the paper until January 24. That was the day the ESOP group sent a follow-up letter to Goldman Sachs and Pulitzer Inc., reiterating its request for the company's books. That previous week, the Wall Street Journal had reported that January 24 was the final day Pulitzer would accept offers, leading some to wonder whether the ESOP morsel was an attempt to fend off bidders (the most prominent of whom, reportedly, was Gannett Co., publisher of USA Today).
That's the spin the Associated Press gave the subject later in the week. "Hoping to fend off outside suitors for newspaper publisher Pulitzer Inc., a group of St. Louis Post-Dispatch workers has launched a long-shot quest to buy the storied company through an employee-ownership effort 'to control our own destiny,'" wrote AP reporter Jim Suhr.
"It's very messy, the whole situation," observes Kelly McBride, an expert on media ethics at the Poynter Institute. A paper enters treacherous waters whenever it reports on itself, cautions McBride, who favors the example set by the Seattle Times, which hired an independent freelance writer to report on that daily's bitter legal battle to break its joint operating agreement with the Seattle Post-Intelligencer.
"Short of hiring an independent reporter, the paper could include an editor's note along with its stories explaining the guidelines established to ensure the reporter is given free rein in reporting," McBride says.
Post-Dispatch business editor Andre Jackson and executive editor Ellen Soeteber maintain that their reporters are given no limits when reporting on the paper and that management neither pushed for coverage of the ESOP effort nor endeavored to downplay it by placing it inside another story.
"I wouldn't say the story was buried," says Soeteber. "There was other news on the subject to report that day, and I believe that's where the writer felt it belonged."
Regardless of its inconspicuous placement, the ESOP story landed on the national wires, thanks in part to an informational handout about the plan, which was distributed by the Freivogels et al. to Post staffers and leaked to several media Web sites. Perhaps more important, at least in the minds of the ESOP group, is that the idea had begun to take hold within the confines of the Post itself.
Fueling the enthusiasm was the fact that architecture critic Robert Duffy was one of the plan's core members. It's common knowledge in the newsroom that Duffy is a good friend of Emily Pulitzer, who owns nearly half of the company's stock. The ESOP group stated in its e-mail to Post staffers that it hoped one or two significant shareholders would work with them in transferring ownership to employees.
"It's a long shot," said one Post-Dispatch scribe, who commented last week before news of the Lee Enterprise acquisition was made public and who spoke only on the condition that his name not be published. "But the fact that Bob [Duffy] is on it makes me think it's doable."
Others were less optimistic. "[The ESOP]'s being treated as a lark, and a bit of a joke," said a fellow staffer, who also declined to be named. "I think people respect its symbolic importance rather than anything else."
With regard to Carey's initial report on the ESOP group, the staffer added: "I think the article raised more questions than answers. The background on that is the Wall Street Journal has been cleaning our clock on much of the Pulitzer story, so it was like, 'Can't we at least get more on this one?' I mean, it's coming from within our own paper!"
On Monday morning, hours after the announced sale to the Davenport, Iowa-based newspaper chain, the ESOP group's spokesman, Bill Freivogel, conceded the effort never had much chance.
"We got the sense that by Friday [January 28] the deal was pretty closed," he says. "It sounds as though Lee was actively interested as early as Christmas. At that point we were really just beginning our process."
Correction published 2/9/05: The original version of this story erred in reporting several details about the proposed employee buyout of the Post-Dispatch. Though a member of the ESOP group informed the RFT that the idea came from a retired attorney, the idea man was actually a businessman. Also, the ESOP group circulated information about the effort via a handout printed at their own expense, not through an internal e-mail. Finally, the group did not formally retain Joe Schlafly at Stifel, Nicolaus & Co.; he consulted gratis. The above version reflects the corrected text.