Casino magnate Sheldon Adelson grabbed all the attention when he stepped forward last week to confirm that he was the mystery buyer of Nevada’s largest newspaper.
But behind the scenes was another billionaire, Wesley Edens, whose New York investment firm manages the newspaper chain that sold the Las Vegas Review-Journal.
Fortress Investment Group LLC, where Edens is a founder and co-chairman, has been the engine behind GateHouse Media Inc. and its hundreds of millions of dollars in newspaper buyouts since 2006. Fortress operates the company through a management agreement, and Edens is a large stockholder.
In Massachusetts, GateHouse is known as the conglomerate that has vacuumed up most of the region’s local newspapers, from Quincy’s Patriot Ledger and the Brockton Enterprise to the Cape Cod Times, as well as a chain of Boston-area weeklies that started as the TAB newspapers in 1979.
Along the way, GateHouse has earned a reputation for layoffs and cost cuts, as it became one of the largest news outlet owners in the industry. Today, its parent company, New Media Investment Group Inc., says it owns 575 publications in 32 states.
So the company’s purchase in March of the Review-Journal and related holdings seemed routine. But when GateHouse sold the paper just nine months later for $140 million, at a large profit, what happened next was anything but business as usual.
First, New Media agreed to the deal without disclosing the real buyer’s name. When reports finally emerged that it was Adelson, the Boston-bred owner of the Las Vegas Sands Corp. and a leading donor to Republican candidates, the twists in the story only grew.
The Review-Journal published a story saying that as the sale was being wrapped up, GateHouse management ordered the paper to monitor three Nevada judges, including one presiding over an inflammatory lawsuit against Adelson’s casinos. GateHouse had earlier tried to get one of its Florida papers to take on the project, the story said.
The Review-Journal never published a story on the judges. But a piece mentioning the judge in the Adelson case turned up in a small New Britain, Conn., newspaper, whose publisher, Michael Shroeder, was introduced to the Review-Journal staff as the new “manager” of the company.
“Part of what’s bizarre in the whole situation is there seems to be quite a lot of ambiguity about who’s in charge,’’ said Rick Edmonds, a media business analyst at the Poynter Institute, a nonprofit journalism research center in St. Petersburg, Fla.
Indeed, as part of the sale, GateHouse was hired to continue operating the Review-Journal, in an uncommon arrangement with a new owner.
Edens declined to be interviewed, through a spokeswoman, as did Kirk Davis, chief executive of GateHouse and chief operating officer of New Media.
Michael Reed, chief executive at New Media, in an e-mail said, “Fortress had nothing to do with the story” that appeared in the New Britain newspaper.
He also suggested Fortress Investment Group was not involved in the sale of the Las Vegas paper.
“New Media (not FIG) owned the Las Vegas Review Journal,’’ Reed said in his e-mail. “New Media decided to sell it because it was an attractive offer and was in the best interest of shareholders.”
However, Fortress is still closely intertwined with New Media and GateHouse.
Edens, in addition to being chairman of the five-member New Media board, owned 300,000 shares of its stock as of the April proxy filing with the Securities and Exchange Commission. He and Fortress entities controlled 2.8 percent of the shares in all.
A Fortress affiliate, FIG LLC, has the management agreement with New Media, charging the news company millions of dollars in fees and incentive pay for overseeing the company’s “day-to-day operations,” according to the filings.
The Fortress entity also earns money for arranging stock offerings for New Media.
According to New Media’s filings, FIG “is responsible for, among other things, the purchase and sale of our investments, the financing of our investments, and investment advisory services.”
Both Reed and New Media’s financial chief are employees of Fortress, according to securities filings, and are paid by Fortress. New Media operates out of Fortress’s Manhattan office.
Fortress is lately having some troubles of its own. The $74 billion manager of private equity and hedge funds is winding down its flagship hedge fund, after losses this year and redemptions by its investors.
But Edens’s other investments are doing well. His firm’s holdings in subprime lending companies have seen big gains. The Wall Street Journal in August dubbed Edens, 53, “the new king of subprime lending.”
He and another New York investment executive bought the Milwaukee Bucks basketball team in 2014 and this summer won $250 million in public financing from the state of Wisconsin to help finance their new stadium, after threatening to move the team out of state.
Edens and his Bucks partner, Marc Lasry, are both large Democratic donors. But they won Republican governor Scott Walker’s support for the controversial bill a month after he said he was running for president. A minority owner of the Bucks, Jon Hammes, has been a major Walker fund-raiser.
Edens’s GateHouse stake also has done well — the second time around.
Fortress first took GateHouse public back in 2006, watched its stock slump until it was delisted from the New York Stock Exchange in 2008, and it took the company through bankruptcy in 2013, with $1.2 billion in debt on the books.
The newspaper group emerged quickly from Chapter 11, with roughly the same owners and a new corporate name: New Media Investment Group. In a complex series of transactions, the old debt was converted to equity, and a Fortress entity that held 52 percent of the debt received equity in the reorganized media company, distributing it to its own stockholders last year.
The stock is up 50 percent since it was “spun out” and began trading in February, 2014. And the acquisitions have continued apace. New Media now owns the Providence Journal, the Columbus Dispatch, the Worcester Telegram & Gazette, and scores of other papers.
One of the few things it has sold: the Las Vegas Review-Journal.
“I’ve seen no indication that their interest in newspapers is civic-minded,’’ said Joshua Benton, director of the Nieman Journalism Lab at Harvard University. “It’s profit-seeking.”
The initial term of Fortress’s management agreement with New Media expires March 6, 2018, according to securities filings. It will automatically renew annually, unless either side terminates the deal.
If the arrangement does end, Fortress also is entitled to a fee.
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