Evening News Assn., the Detroit media company currently fighting a hostile takeover bid from Hollywood executives Norman Lear and A. Jerrold Perenchio, notified shareholders Thursday that its directors are now considering selling the company.
The decision, a reversal of management's earlier position, formally opens the door for a bidding war for the 112-year-old media company, which publishes the 666,949-circulation Detroit News.
Many Wall Street analysts and Evening News shareholders were predicting just such a derby after Lear and Perenchio launched their unfriendly takeover plan in late July.
The $566-million Lear-Perenchio offer, these insiders said, was low, but it would nonetheless whet the appetite of Evening News shareholders who were unhappy with the company's poor financial return.
Palm Springs Paper
In addition to the Detroit News, Evening News owns five television stations, two radio stations and eight other small newspapers in California and New Jersey. Among the smaller papers is the highly profitable Desert Sun in Palm Springs.
"The company's representatives and advisers are currently engaged in discussions with a number of third parties who have expressed serious interest in acquiring either the company as a whole or one or more of its operating properties," Evening News Chairman Peter B. Clark wrote his shareholders.
Among those that Evening News shareholders have heard are negotiating to buy the Detroit News is Gannett Co., publisher of USA Today. Gannett refused to comment on the report.
The first indication of a possible sale of the family-owned Evening News Assn. came earlier this year when a group of shareholders controlling nearly 25% of the stock hired an investment banker to solicit buyers for their shares.
The dissident group was unhappy with such items as Evening News' 1984 after-tax profit margin of just 4% in an industry that averages closer to 15%.
The problems, analysts said, are due in large part to heavy losses at the Detroit News, which is locked in a battle with the rival Free Press for the Detroit newspaper market.
In July, Lear and Perenchio, who made their name in television, launched a hostile takeover bid for the company by offering $1,000 a share, or $453 million. Initial reaction was mild, with most analysts calling the bid too low. Earlier this week, Lear and Perenchio raised their offer to $1,250 a share.
Even the sweetened offer may prove insufficient, however. On Wednesday, investment banker Porter Bibb said, a large block of Evening News shares sold for $1,300 a share in a transaction worth nearly $20 million.
Urged to Reject Offer
Bibb's firm of Ladenburg, Thalman & Co. was hired by dissident shareholders to solicit the buyers, who were not identified.
In his letter Thursday, Evening News' Clark similarly repeated management's recommendation that shareholders reject the Lear-Perenchio offer.
A federal appeals court, meanwhile, continued deliberating Lear and Perenchio's arguments Thursday that their offer was exempt from a Michigan law designed to inhibit hostile takeovers.