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What's the number? What's the real number?

That's what the competition for the Chicago Sun-Times comes down to this week, and probably into next. On Monday, the Edwin Eisendrath group upped its ante to $15 million, drawing together would-be funding from a Chicago-only coalition of four labor unions, represented via the Chicago Federation of Labor, and something less than a dozen, so far unidentified, local businesspeople. ["Tronc's Michael Ferro Would Be Overpaying For Sun-Times at $15 Million or More"] That $15 million is a significant number in the competition between Eisendrath's group and Tronc, which has made known its own willingness to buy Chicago's second paper about a month ago. But it may not be the most significant number. 

That number, according to three insiders with knowledge of the process, may be one known as "liquidation value." Blend. Grate. Pulse. Chop. The Sun-Times has been through the ringer as a struggling, but lively, second paper for so long now. Why now try "liquidate" as a discipline?

Here, the exercise is to figure out what would be left if the Sun-Times had to close up shop -- finding no buyers and its current owners unwilling to further subsidize operations. What would be left in the coffers? It's the Department of Justice's Antitrust Division that's been driving to that number, as one means to establish a value, or valuation, for the Sun-Times, which is now projected to lose something less than $4 million in each of 2017 and 2018. How could that number play into a sale?

Certainly, the Eisendrath group [Exclusive: Eisendrath wants Sun-Times to serve 'the 99 percent'], seeing a high bar of reinvestment and re-strategizing necessary if they get the paper, wants to pay as little money for it as possible. They'd love to use the $15 million to maintain a steady Sun-Times ship and then to invest in a turnaround plan. So, no surprise, they'd like to land the enterprise for a buck, a price I named ["Will Tronc Get Squeezed Out Of a Sun-Times Buy?"] as market reasonable for a media business with no profit and none on the horizon. Of course, Wrapports owners, who paid about $23 million for Sun-Times Holdings in 2011, would like to divvy more than mere cents, though no possible sales option gets the creamy crop of Chicago elite businesspeople anywhere near whole. A one dollar offer here is clearly a first one, though at this reading, it's hard to know the level and timing of actual sales negotiations. One source notes that "Eisendrath would like to close by July 3" -- a new Independence Day for the Sun-Times -- but that timing may be aggressive. The distance between $1 and the Sun-Times' liquidation value is the area to watch here. 

The DOJ, which has had as many as seven staffers on a single phone call with a Sun-Times business partner, has devoted lots of due diligence to the valuation question. If it determines a liquidation -- accounts payable and receivable, closing costs such as severance, etc. -- to leave say $4 million in the Sun-Times' bank account, then it might set a price of $4 million and a dollar as reasonable price it would urge the Wrapports owners to accept from the Eisendrath group.  Wrapports could say "no," but then the DOJ could as quickly say no to the larger payout, in $10-$15 million range, that Wrapports might get from Tronc.

The reason: "market concentration." Those words hang in the air in Chicagoland, as DOJ can exercise its veto power, not forcing a sale to Eisendrath, but preventing one to the Sun-Times' main print competitor, the Tronc-owned Chicago Tribune. That's what DOJ did last year in Orange County. Tronc thought it had its deal to buy the bankrupt Orange County Register, at great accretive terms, but DOJ's scarlet letter prevented that agreement and effectively handed the Register to Digital First Media.

As in Orange County, it's easy to mock the Department of Justice's concern here. Clearly, once-near-monopoly dailies like the Chicago Tribune hardly dominate local advertising as they once did. How much might ad rates go up for businesses in Chicago if Tronc jointly sold ads for the Tribune and Sun-Times, as it would if it were allowed to buy the S-T? (A Tronc acquisition would mean merging all business-side activities of the S-T with the Chicago, while maintaining, time and staffing level unwilling to be specified, an "independent newsroom.")

If ad competition may be overblown here, the value of two large, if downsized, daily editorial voices in America's third largest urban area remains clear. And, that, however murky the legal reasoning, is what seems most at stake here. How can a second strong print-based institutional brand live on past 2017-- and maybe find a route to sustainability in the next '20s?

That's how DOJ holds the hammer here, and why its own dedication to naming a liquidation price has become meaningful. At a low, sub-$6-7 million liquidation price, the Eisendrath group could pay something to Wrapports and employ the rest of its funding to build the next Sun-Times. At more that, the re-investment needs become harder to satisfy. While none of the parties involved in this would-be transaction will speak on the record, that's the landscape on which the likely end days of the Wrapports-owned Sun-Times will play out.

For Michael Ferro, as the prime mover of Wrapports' buy of the Sun-Times six years ago and now chairman of Tronc, the small, somewhat tarnished prize of the Sun-Times would be a needed small win. As newspaper companies absorb the direct body blow of double-digit print ad losses, buying other properties and merging operations is one of the few strategies that provides short term earnings growth. Tronc tried to do that in buying the Register and whiffed, and may find itself struck out again with the Sun-Times. Peel history back a couple more years, and Tribune Publishing, under former CEO Jack Griffin, eager to employ the same strategy, lost out on buying newspaper properties owned by E.W.Scripps and Journal Media Group, out-manuevered by Gannett, though Griffin was able to cluster a bit, buying the Sun-Times regional newspaper and a couple in Maryland, adjacent to the company's Baltimore Sun.

This time around, Ferro's tightening bottom-line arithmetic could get even harder. An Eisendrath group would move to renegotiate the Sun-Times' printing and distribution contract with the Chicago Tribune, a contract worth $12 million or more annually in profit to Tronc. It wouldn't be the only loss in lucrative in-sourcing business that's become more vital to struggling newspaper businesses like Tronc. Nine hundred miles to the east, Tronc's Hartford Courant is about to lose a contract of its own.  Hearst Newspapers recently bought the New Haven Register from Digital First Media and so the days of the Tronc's Hartford Courant printing and producing the Register are numbered; Hearst will soon move those activities to its own plant in Bridgeport. 

Printing -- that still-durable support of newspaper companies even as they try to transform digitally -- provides a rumor de jour in the Sun-Times saga. Rumor circulating is that Lee Newspapers, a chain of 46 newspapers, possibly be a bidder for the Sun-Times. After all, Lee owns the Times of Northwest Indiana (Munster-Hammond area), invested in new presses not long ago, and sits just 38 minutes via expressway from the Sun-Times' downtown Chicago offices.  At our press time, Lee was unavailable for comment on that possibility.