End of the road? - Chicago Defender newspaper - Brief Article

Black Enterprise, April, 2000 by Hersch Doby

Financial troubles at Chicago Defender force owners to seek new investors

It appears there will be no fairy-tale ending or last-minute rescue this time around. A $10 million debt bailout aimed at saving the historic Chicago Defender and its three sister newspapers from sale has fallen through, prompting the Sengstacke family to place the newspaper group on the auction block.

Lawyers for Sengstacke Enterprises Inc. say the group is now accepting bids in order to raise the capital to pay back taxes. Nina Fain, of the Chicago law firm McBride, Baker & Coles, says an estimated $4 million in estate taxes were assessed after the 1997 death of company chairman John Sengstacke. The company grossed an estimated $9 million in 1998. Last year's revenue figures were not available.

Fain says the newspapers' auction, scheduled to be held early this year, has attracted numerous inquiries, including one from PublicMediaWorks Inc., a black investment firm in Chicago, and another from Houston-based Equal Access Media Inc.

Detroit businessman and BLACK ENTERPRISE 100s CEO Don Barden had agreed in principle to purchase the newspapers for $12 million in a complex financial plan. Under that proposal, Barden would have received a 51% share in Sengstacke Enterprises, but editorial control would have remained with the family.

It was not immediately clear why the Barden deal soured. Barden, owner of Barden Cos. Inc. (No. 13 on the BE INDUSTRIAL/SERVICE 100 list with $143.5 million in sales in 1999), was not available for comment. Barden Cos. includes five Illinois radio stations, a software company, an Indiana riverboat casino and an Ohio real estate firm.

Now facing new management, the historic 94-year-old Sengstacke newspaper empire includes the Defender, the Michigan Chronicle of Detroit, the New Pittsburgh Courier and the Tri-State Defender in Memphis, Tennessee. Myiti Sengstacke, John's granddaughter, was to become publisher of the Defender, while her father and an uncle, Tom Picon, were to manage the Courier and the Memphis Defender.

Myiti Sengstacke issued a statement through her attorneys. The 28-year-old Sengstacke said she had worked since her grandfather's death to ensure the newspapers would not only survive but remain family-owned, and was saddened by this turn of events. "Our grandfather never wished for the sale of the papers. Our family is committed to a process which will assure that the new owners maintain the values and traditions of these newspapers," she said.

Robert Sengstacke Abbott founded the Defender in 1905 as a weekly. It became one of the first African American publications to reach a circulation of over 100,000. It was widely read in the North and, because of its progressive content, was circulated underground in the South by Pullman porters and others. With its portrayals of the job-rich industrial North, the Defender is credited with starting the massive migration of blacks to the North. Abbott's nephew, John Sengstacke, later took over, publishing the paper daily in 1956.

Readership of Sengstacke's lead paper has fallen dramatically. Today it reaches an estimated 25,000. The Chronicle is the group's largest and possibly only profit-maker, with nearly 48,000 readers.

Sengstacke left no clear succession plan, instead naming Northern Trust as estate trustee with instructions to provide for his six grandchildren, of whom Myiti is the oldest. Her adult brothers, Omhari, Saief and Hasami, are all involved in the business.

Fain and co-attorney Elias Matsakis have been soliciting offers for Sengstacke Enterprises; Duff & Phelps L.L.C. will conduct the auction. "[We're] working to create a transaction which best protects the interests of the beneficiaries," says Matsakis.

Myiti Sengstacke dismissed Northern Trust in 1998 after the bank insisted on selling the newspapers for an estimated $10 million to $12 million. But attempts to gain an immediate infusion of capital and simultaneously retain daily control over Sengstacke Enterprises have seemingly backfired on the family.

PublicMediaWorks had offered $12 million for Sengstacke Enterprises when Northern Trust first announced its sale nearly two years ago but was turned down. While PublicMediaWorks and Equal Access Media are confirmed bidders for the newspaper chain, no amount has been specified. Kurt Cherry, spokesperson for PublicMediaWorks, could not be reached for comment.