$25 million for Sun-Times Media Group

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: Tyree investor group makes bid worth $25 million for Sun-Times Media Group : Offer from group led by Chicago financier Jim Tyree includes $5 million in cash; pensions, tax liability not part of deal : : By Michael Oneal and Julie Johnsson : Tribune reporters : Ever since Chicago financier Jim Tyree expressed interest in assembling a group of investors to rescue Sun-Times Media Group Inc. from bankruptcy court, he has been called everything from egotistical to crazy. : When the parent of the Chicago Sun-Times filed for Chapter 11 protection on March 3, it was burning through $1.5 million a week and belonged to an industry falling off a cliff. : But on Tuesday, when Tyree's group finally pledged to buy Sun-Times Media for $25 million in cash and assumed liabilities, two things became clear: Tyree doesn't much care what his critics think, and the bargain-basement price he's paying makes not caring a whole lot easier. : "I think this is a very good business investment in a business that will at some time in the future be a winner," said Tyree, chairman of Mesirow Financial. "I'm aware [of what other people think], and it's a legitimate viewpoint. But I choose to look at it differently." : The bid, first described in the Chicago Tribune on Friday, includes the flagship Chicago Sun-Times daily tabloid as well as 58 suburban papers and their associated Web sites. Tyree's group agreed to pay about $5 million for the company's assets and assume $20 million worth of liabilities. : The group will not assume a $600 million tax liability left over from the days of now-imprisoned former press lord Conrad Black and paroled former Publisher F. David Radler. Neither will it take on the company's pension obligations. : But the Tyree group has pledged enough money to fund the company's transition to profitability and make investments toward growth, said Sun-Times Media Chairman Jeremy Halbreich, who said he plans to stay on with his management team. : The question of the hour is, how Tyree will make it work? And on that point he wouldn't comment, citing competitive issues. : But Halbreich insisted that the company can stop the flow of red ink by the middle of the fourth quarter through another series of cost-cutting measures. He's planning to shut the company's printing press in suburban Northfield, he envisions more layoffs, and there may be more wage and benefit cuts. : Halbreich also said the company is creating efficiencies by transitioning all of its suburban papers to tabloid format to save costs and make it easier for advertisers to make a single buy across the papers without worrying about different ad sizes and formats. Additionally, the papers have raised newsstand and delivery prices and invested in systems to make operational systems more consistent and streamlined. : Not keeping the pension obligations will help. The company has skipped the past two payments to its pension plans, shortfalls counted toward temporary 15 percent cuts accepted by unionized employees this spring. : Tyree has insisted that the 15 percent cut become permanent, and the bid is contingent on unionized workers agreeing to that and any other changes. : That could pose a logistical nightmare for both Tyree and union leaders. The company has five collective-bargaining units and only weeks to wrap up new contract agreements before the sale process concludes or Sun-Times Media runs out of cash. : "The union needs to move quickly, and so does the company," said Tom Thibault, executive director of the Chicago Newspaper Guild, which represents about 550 workers, including the editorial staff of the Sun-Times. "There's a serious time limit on it." : Tyree will be able to offload Sun-Times liabilities like the tax and pension obligations because the company plans to split itself into a "good" company and a "bad" company using the same part of the federal bankruptcy code employed in the General Motors and Chrysler bankruptcy cases. : The good company would include all of Sun-Times Media's papers and Web sites and would emerge from court with a clean slate. The bad company would include the tax and pension liabilities and stay in bankruptcy. : Under the rules, the offer from Tyree will be treated as a "stalking horse" bid by the court. That means any competing bidders will have several weeks to step forward and create an auction for the company or its individual assets. : Most observers expect the auction process to be a mere formality for the same reason many scratched their heads over Tyree's interest in Sun-Times Media in the first place. Despite Tyree and Halbreich's seemingly unbending optimism, Sun-Times Media is still in desperate straits. : The company has burned through tens of millions of dollars in cash over the past two years and lost $3.8 million in July (the latest figures available). The burn rate has improved since the bankruptcy, but the company finished the month with $19.3 million in cash on hand, a figure many experts said was barely enough to fund a shutdown if need be. : The problem, most experts agree, is not costs but revenue. The Sun-Times has traditionally found it difficult to compete against its larger rival, the Chicago Tribune, said Alan Mutter, a San Francisco-based media analyst and consultant who did work for Halbreich's predecessor, Cyrus Freidheim. : But as the economy and advertising market contract, that can get worse, since the larger newspaper in two-newspaper cities tends to attract a disproportionate share of advertising revenues, Mutter said. : Moreover, he said, Tribune has challenged the Sun-Times' traditional commuter audience with its free tabloid RedEye and is using its multimedia might to sell itself as a one-stop shop for reaching the Chicago marketplace. : The key, Tyree said, will be to devise new ways to compete. : "You can assume there will be tremendous innovation at the Sun-Times," he said.

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