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Monday, Apr 2, 2012 4:00 PM UTC

Local investors buy Philly newspapers for $55M

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Topics: From the Wires,

Local investors buy Philly newspapers for $55MThe Philadelphia Inquirer and Philadelphia Daily News newspapers sit on display on a newsstand, Monday, April 2, 2012, in Philadelphia. Philadelphia's two largest newspapers could trade hands Monday for the fifth time in six years. Several powerful local businessmen are trying to close a deal to buy The Philadelphia Inquirer and Philadelphia Daily News from New York hedge funds. (AP Photo/Matt Rourke)(Credit: AP)

PHILADELPHIA (AP) — A group of powerful business leaders announced Monday they have closed a deal to purchase Philadelphia’s two largest newspapers from hedge funds for approximately $55 million, a fraction of what investors paid for them in 2006.

The buyers, who include cable TV mogul H.F. “Gerry” Lenfest, powerful New Jersey Democrat George Norcross III and former New Jersey Nets owner Lewis Katz, said they plan to keep the newspapers’ tradition of strong journalism alive in the digital age.

They had an exclusive option to bid for Philadelphia Media Network, which also operates the Philly.com website and a weekly sports publication.

The purchase price — which includes up to $10 million from investors to fund operations — is less than 15 percent of the $515 million paid by a group of investors in 2006, and far less than the $139 million creditors paid at a 2010 bankruptcy auction.

“These newspapers have an historic tradition of outstanding journalism in our city and we want to preserve that tradition and marry it to the exciting digital opportunities that are revolution the news business,” Katz said in a statement released before the scheduled news conference Monday morning.

The buyers established a new company, Interstate General Media LLC, to operate Philadelphia Media Network.

The sale comes as Philadelphia Media Network has announced plans to cut 45 positions this month, including 40 in the newsroom. Last year, the newsrooms lost 20 jobs.

Company officials have cited both finances and the consolidation of newsroom functions in discussing the cuts. Some staff work now appears in both newspapers, a trend that will grow as beat reporters and photographers handle assignments for both the broadsheet Inquirer and tabloid Daily News.

According to a recent letter of intent obtained by the Daily News, the sale would include $200,000 to fund severance pay for an additional 35 people, and $500,000 to pay for the departure of senior managers. Some key officers would remain, the memo said. It’s unclear if they include publisher Greg Osberg, who was criticized by newsroom employees for allegedly censoring stories about the sale.

Philadelphia business magnate Raymond Perelman, who bid against the creditors until the end the last time around, was denied the chance to mount a rival bid this year against the Lenfest group, and briefly joined them. But he withdrew when he learned he wouldn’t be the majority owner.

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