Inquirer owners seek end to partnership, disagree on how

George E. Norcross III, co-owner of IGM.
George E. Norcross III, co-owner of IGM.
Posted: January 05, 2014

The Inquirer could be sold for the fifth time in less than a decade, as the two rival groups of co-owners battling for control of the newspaper's parent company are now seeking to dissolve their troubled partnership.

After weeks of silence in the feud, the two sides now agree, in court filings that emerged Friday, that their differences were irreconcilable. They disagree, however, on how a sale should proceed.

New Jersey businessman and Democratic leader George E. Norcross III on Friday asked a Delaware court to order a private auction among the five partners of Interstate General Media, which owns The Inquirer, the Philadelphia Daily News, and Philly.com.

Lewis Katz and H.F. "Gerry" Lenfest, meanwhile, want a public sale of the company, and late Thursday asked Philadelphia Common Pleas Court to order one.

In a letter sent to IGM employees, Norcross and co-owner William Hankowsky argued that a public auction would risk job losses, as hedge funds or other outside investors might assume "too much debt" to buy the company, or might close one or more of its media properties.

Richard Sprague, an attorney for Katz and Lenfest, said in an interview that a public sale would maximize the value of the company to the shareholders while ending the co-owners' deadlock.

"Both sides have come to realize that they are at an impasse, and the best thing is to have a sale of the company," Sprague said. He added that Katz and Lenfest were committed to bidding for control of the company.

Sprague declined to provide a copy of the filing; the court was closed Friday because of the snowstorm, and it was not available on the public docket.

It is unclear which court - Philadelphia or Delaware - will have jurisdiction over the dissolution of the partnership.

Because IGM was incorporated in Delaware, the Norcross side believes that state's courts should decide the issues. Katz and Lenfest believe that since the company conducts business in Philadelphia and because Common Pleas Court has already ruled on other aspects of the dispute, the case should remain in the city.

Norcross and Hankowsky said Katz had rejected six proposals since early 2013 to settle the differences among the partners.

"You have referred to the newspapers and Philly.com as 'public trusts,' " the men said in a letter addressed to Katz and released to reporters. "It is past time to begin treating them as such. We have taken this action because we cannot let the future of company, our employees, and readers be held hostage to your unwillingness to act in its best interests."

Katz could not be reached for comment.

The ownership feud came into public view with the Oct. 7 firing of Inquirer editor William K. Marimow by publisher Robert J. Hall. The publisher said the editor was slow to make recommended changes to the paper and was resisting the company's digital-news strategy.

Katz and Lenfest sued to undo the firing, arguing that Hall was acting as a proxy for Norcross, who they said was seeking control over the newspaper's content. Norcross and his allies pointed to several incidents that they said showed that Katz was interfering in the newsroom, in violation of the owners' pledge to stay out of news operations.

After several days of testimony, Common Pleas Court Judge Patricia McInerney ordered Marimow reinstated Nov. 22. She denied Katz and Lenfest's request to remove Hall.

McInerney ruled that the partnership agreement forming IGM gave Norcross and Katz, as a two-member operating committee, control over major business decisions of the company. Katz's rights were violated because he was not given a chance to block the firing of Marimow, the judge ruled.

The inability of the two operating members to agree and their effective veto power makes the company ungovernable, the Norcross group said in its filing with Delaware Chancery Court.

The filing cited Katz's insistence that Hall, the publisher, not be employed after Dec. 31, and the Norcross group's belief that Hall could stay unless both operating partners agreed to fire him. Hall remains on the masthead of The Inquirer and the Daily News, and also is listed as publisher on the Philly.com site.

The media properties have changed hands several times since 2006, when a group of local investors headed by businessman Brian P. Tierney purchased them for $515 million. The company was sold in a bankruptcy auction to creditors in 2010 for $139 million and then the current ownership group purchased it for $55 million in April 2012.


tfitzgerald@phillynews.com

215-854-2718

@tomfitzgerald

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