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February 19, 1996

Shareholders Shrugging Off Journal Communications Bid

By IVER PETERSON

Employee owners of Journal Communications Inc., which owns The Milwaukee Journal Sentinel and a half-dozen valuable subsidiaries, have shown little interest so far in an investment group's offer to pay nearly double the current trading price for their stock.

"To tell you the truth, I think people are happy to have this be an employee-owned company," said Chris Thomas, a salesman at Journal Communications advertising and marketing subsidiary, ADD Inc.

Thomas represents his subsidiary's employee shareholders, called unit-holders under the company ownership plan. About 90 percent of the company's unit-holders are employees.

"Sure, we could get a lot of money," said Thomas. "But I think people are concerned that in the long run they wouldn't have their jobs if this happened. That's what usually happens when a new company takes over."

A New York investment group called Sextant Partners, saying they represented an American media company, sent a one-page offer of $1 billion in cash for Journal Communications to the company on Jan. 31. A week later, Robert Kahlor, the company's chairman, rejected the sale.

"Journal Communications is not for sale," Kahlor wrote to Christopher Shaw, a Sextant partner. "We believe that all employees, unit-holders, our community and the company will remain better served by the company remaining independent and employee-owned."

The rebuff left Sextant hoping the prospect of doubling the value of their stock would tempt Journal Communication's 2,650 stock owners to part with their shares. But to hear some employees tell it, the offer is not tempting enough to sell their shares is what the company said is the country's oldest employee-owned company; it was founded in 1882.

"We just heard about it on Thursday, but I haven't heard a lot of interest from people," said Mark Krueger, a circulation manager for the Milwaukee Journal Sentinel, the company's flagship and one of the few remaining major daily newspapers that is not owned by a chain.

Krueger, who is in his 11th year as an employee, said he owned 3,800 shares of Journal Communications stock, which is currently worth $137,712, or $36.24 a share, under a formula used to determine the stock's value.

The Sextant Partners offered $1 billion for the company's 14.4 million shares, or about $70 a share. Journal stock is not publicly traded, but is priced according to a formula that takes in a combination of company assets and earnings over the last five years.

The company also owns radio and TV stations in the Milwaukee area.

But Krueger said that the $266,000 he could earn under the Sextant deal does not interest him.

"I see those shares are my future, for when I retire, not something to sell now," he said. "The man who hired me saved all of his shares, and he is now living quite comfortably."

Although Sextant Partners has said it hopes the offer of a buyout will be put to the employees, the Journal stock-ownership system is heavily loaded against even a welcome takeover.

Under the terms of the employee stock ownership plan initiated in 1937 by Harry Grant, then chairman of the company, a sale of the company would require the approval of two-thirds of the stock voted by active employees.

Even if this should occur, the rules also allow those opposing a buyout the first right to buy the stock of those seeking the sale -- at the formula price, not the price offered by the buyer.

Grant's descendants, who own 10 percent of the company, have also rejected the sale proposal.


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