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Paper trail shows how the Ex was won

Billionaire Philip Anschutz went from Bay to Breakers to buyer

Feb. 23, 2004

By Amy Bryer
American Business Journals

Denver billionaire Philip Anschutz ran the 7.46-mile Bay to Breakers race last May in 1 hour, 18 minutes, an excellent time for a man in his 60s, by anyone’s standards.

Nine months later, he was on his way to owning the famous foot race’s sponsor — The San Francisco Examiner — in a deal announced Thursday.

Anschutz will take over the Examiner from San Francisco’s Fang family, which has operated the Examiner since 2000. The deal also includes other newspapers published by the Fangs, including the San Francisco Independent and the San Mateo Independent as well as related properties. Terms aren’t being disclosed.

Anschutz becomes the fourth owner of the Examiner since it began publishing in 1865 and which later became part of the fabled empire of William Randolph Hearst, whose life was the model for the movie “Citizen Kane.”

Anschutz, an oilman-turned-billionaire investor and founder of Denver-based Qwest Communications, is described by close associates as a “news junkie.” He reads dozens of magazines, trade journals, newspapers and other publications.

But you’ll rarely see a quote from Anschutz in any of them. To say that Anschutz is publicity shy is a gross understatement. He politely, but flatly, refuses to be interviewed and has for years.

So why did someone so assiduous about keeping his name out of the media come to be an owner.

“For (Anschutz), this is just a good business deal, a good investment,” said a source close to the deal, when asked why the notoriously publicity-shy Anschutz would want to buy a newspaper. “It’s something that (Anschutz has) thought about for a long, long time. All of the things fell into place … a great name, an enormous market. From a business standpoint, everything made sense.”

Birth of a deal

The deal started last May. Returning home to Denver with a copy of the Examiner under his arm, Anschutz asked his investment staff to look into the troubled newspaper as a possible investment.

Not long after, the Fang family began exploring how it might spin off some or all of its assets, including the rights to the race, the Examiner newspaper and the two Independent newspapers and commercial printing plant.

Last fall, following the death of Douglas Fang after a battle with stomach cancer, talks began in earnest between Anschutz representatives and the Fangs. On Dec. 23, the parties signed an agreement in principle.

Anschutz takes over a newspaper company that has been on a long slide downhill for years, but especially since Hearst jettisoned the Examiner in its purchase of the more successful and bigger circulation San Francisco Chronicle.

The San Francisco Independent and the San Mateo newspapers publish two to three days a week, respectively.

Anschutz Co. representatives would not reveal the cost of the purchase, but as part of the sale for the three newspapers, Anschutz also will own the Examiner-sponsored Bay to Breakers race.

Together, the papers have a combined circulation of 436,000, which is on par with the 512,000 circulation at the competing San Francisco Chronicle, although it’s hard to directly compare circulation because one paper reports daily paid circulation and the others are free or so-called “general circulation” publications. They use different auditing services to certify circulation to advertisers.

One big strength: 95 percent of the San Mateo County subscribers are home deliveries, said Scott McKibben, CEO for ExIn, the Fang’s newspaper company, who will remain as CEO of SF Newspaper Co.

“There’s a demand for an alternative to the Chronicle,” McKibben said. “They don’t have the household penetration advertisers need.”

Three potential buyers

The Examiner, a free daily circulated Monday-Friday, has been in a tailspin for a year. It laid off most of its employees in February 2003. In December more job cuts were made.

After COO Douglas Fang’s death, the family was more interested in selling, but initially the Bay to Breakers race was the first asset on the chopping block. As time went on, the deal grew to include the newspapers and the company’s production facility, but the Fang family did not give up the paper easily even after it was up for sale, McKibben said.

There were three serious buyers; the Anschutz representatives won’t say who they were.

In addition to McKibben staying on as CEO, longtime Anschutz adviser Robert Starzel will be chairman of the SF Newspaper Co.

To an outsider, it’s a curiosity that Anschutz would be attracted to investing in a newspaper.

“He’s always had in the back of his mind that newspapers have a great deal of influence and he’d like them to have a good influence,” Starzel said. “It’s an altruistic investment I think he thinks will be good for the city.”

Anschutz cares about San Francisco and has seen it in good times and bad, he said. When the 1989 earthquake hit, Anschutz was stuck in Oakland and hopped a helicopter into San Francisco. He lived in the city for about five years around that time and has run the Bay to Breakers about a dozen times in the last 15 years.

Sparking speculation

As with most Anschutz investments, there will be much speculation as to his motivations for buying a struggling newspaper group with a combined newsroom staff of about 70 people in a town that already has a daily newspaper with 385 editorial staff.

Anschutz has had some extraordinarily bad press in the last two years. Fortune magazine named him the nation’s “greediest executive” for selling a portion of his interest in Qwest, even though he remains the company’s biggest single shareholder.

Some may suspect Anschutz may be trying to have control over his own media outlet to sway public opinion.

“As a resident of this city, I can say that’s a ludicrous, futile effort,” Starzel said. “He’s not about to change the way this city looks at the world.”

McKibben said he has adequate staff to focus on San Francisco and may consider adding resources in the future.

One thing McKibben and Starzel say they aren’t worried about: editorial interference from Anschutz. In fact, according to another of Anschutz’ close advisers, he wants the paper to be respected for its balanced approach.

“He wants an honest paper that deals with facts that doesn’t get an agenda trying to prove something on the front page,” Starzel said.

In any case, the change of ownership marks to latest chapter in the Examiner’s storied history.

It’s said that millionaire mining, real estate and ranching tycoon George Hearst, William Randolph Hearst’s father, won the unprofitable Examiner in a card game in the late 1800s. The paper stayed in the Hearst family for more than 100 years. In 1965, the Examiner signed a Joint Operating Agreement with the Chronicle to combine business operations. As an afternoon daily, the Examiner had suffered from competition from television news and production difficulties that prevented it from publishing the freshest news. Then, in 2000, the Hearst Corp. decided to buy the competing Chronicle for $600 million and close the Examiner.

Locals residents were up in arms at the thought of losing its two-paper town and the Justice Department intervened. To appease the federal government, Hearst sold the Examiner to the Fangs and sweetened the deal with a $66.7 million subsidy to the Fangs for three years.

It essentially allowed the Fangs to be reimbursed by Hearst for any costs associated with continuing to publish the Examiner.

That subsidy was up July 31, 2003.

Building billions

Like William Randolph Hearst’s father, Anschutz made his money by taking risks and finding values in a wide range of industries. He’s bought unlikely prospects and turned them into money makers.

He made his first big money in the Utah oil fields in the 1970s. He built up his billionaire status with the Southern Pacific Railroad, which he owned until 1995 when it merged with the Union Pacific. Anschutz, however, retained the rights-of-way to the Southern Pacific and used it to construct a fiber-optic network that connected major cities the railroad passed through. That strategic move helped him start Qwest Communications International Inc.

Anschutz has a keen eye for the art of the deal, associates say.

“Typical of Phil, he does have foresight, but it’s a kind of intuition that one can hardly sit here and be logical about,” Starzel said.

Amy Bryer is a reporter for the Denver Business Journal, an affiliated newspaper.

(c) 2004 American City Business Journals Inc.

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