Norcross testifies that Inquirer owners need to quickly settle

Posted: April 16, 2014

WILMINGTON - Inquirer co-owner George E. Norcross III testified Monday that the newspaper's parent company was in a "tenuous" position after losing money the last two years and needed to quickly settle its ownership dispute through a private auction.

To maintain what stability it has, Norcross also said, the company's editorial focus needs to shift to a "hyper-local" strategy of covering news.

The March 2012 partnership agreement between Norcross and co-owner Lewis Katz gave each veto power over key decisions.

Norcross, testifying in a Delaware courtroom on the first day of hearings on the sale of company, said he agreed to that now-problematic governance structure only on the condition that if they ever needed "an amicable divorce," it would be done through a sale among current owners.

Norcross argued that his proposal for a private auction fit within those parameters.

"We wanted continuity of ownership, if the ownership was going to change," Norcross told Vice Chancellor Donald F. Parsons Jr. "That is the business deal I negotiated with Lewis."

Under his plan, Norcross said, he was prepared to start the bidding at $77 million, his calculation for the initial $61.1 million investment by all of the owners of Interstate General Media Holdings L.L.C. plus $8 million in bank loans, and additional debts.

Norcross would not say how much he would bid if the auction was public with single sealed bids, the preferred format of Katz and fellow owner H.F. "Gerry" Lenfest.

Norcross, who is allied with fellow owners Joseph Buckelew and William P. Hankowsky, testified for about three hours. Katz and Lenfest are scheduled to testify Tuesday.

Norcross' testimony and cross-examination did not involve detailed discussion of conflicting claims of newsroom meddling, as occurred when the dispute was first aired in a Philadelphia courtroom in November. Norcross did not testify at that proceeding.

It did provide new details on how the ownership group was stitched together.

Norcross said he had been exploring the acquisition of the media company - IGM also owns the Philadelphia Daily News and Philly.com - for most of a year before the group bought it in March 2012. But he said he didn't meet Lenfest, one of the original six partners, until a couple of days after the deal was completed.

Norcross said IGM was a "failing enterprise" when he and the other current owners bought it from a group of hedge funds, who called the sale "Project Cheesesteak." He has said he is arguing for a private auction to "maximize" the value of the company, but also keep to the cost low for whichever current owner gets the company.

He and his legal team pointed to parts of the limited liability company agreement that they thought supported their cause. The Katz-Lenfest attorneys argued otherwise.

Delaware Chancery Court does not use juries. Parsons asked questions of witnesses, and signaled possible concerns about both auction proposals. He could rule as soon as next week.

The Norcross group once wanted an auction by April 30. It argued that current owners already knew the business, so IGM could save money on so-called data rooms, set up so outside bidders can review financial information.

Katz and Lenfest prefer an auction within 45 days of the judge's ruling, with the first 30 used to attract bidders and give them a chance to see the finances.

The Newspaper Guild, the union representing newsroom and other employees, has been allowed to intervene in the case. It says outside investors will help it bid independently, but it will need time to review IGM finances.

"It will probably take 45 days no matter which kind of auction - and maybe more," the judge said.

Testimony was to resume Tuesday morning.


dsell@phillynews.com

215-854-4506

Inquirer staff writer Thomas Fitzgerald contributed to this article.

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