Real Times Inc. assumes ownership of Chicago Defender

The Chicago Defender has a powerful history among African Americans in this country and in publishing. Founded in 1905 by Robert S. Abbott, it was a leading voice against Jim Crow segregation policies. Pullman porters often carried it on trains that traveled from Chicago to the Southern blacks freed from slavery. It had such a following, as many as 500,000 readers, that it was credited with accelerating black migration from the South to the northern cities of Chicago and Detroit.

The paper's history closely followed the African American experience. For many years, the paper was owned and operated by John H. Sengstacke, Abbott's nephew. And under Sengstacke's leadership it grew to also include the Pittsburgh Courier, the Tri-State Defender in Memphis and the Michigan Chronicle in Detroit.

But Sengstacke Enterprises Inc., owner of the newspaper chain, wasn't without its own internal strife, resulting in family spats among the various Sengstacke factions that owned the paper. John Sengstacke's death put the papers, and the family, into a tailspin that would take six years and the intervention of the courts to unravel.

Thom Picou, CEO of Real Times Inc., the company that purchased Sengstacke Enterprises in January 2003, is a nephew of Sengstacke's. He found disfavor with his uncle in the late 1980s while he was president of Sengstacke Enterprises and eventually left the company. When his uncle died, he and partner Kurt Cherry, CFO of Real Times, who had been an accountant and investment banker, thought they had found the perfect entrée to the African American publishing industry.

"The Chicago Defender is one of the real gems of black newspapers. Although under-performing, it also comes with the highest brand recognition," says Cherry. It has one of the largest concentrations of African American households, representing one million homes, with a presence in three of the top 10 African American markets (Chicago, Detroit and Memphis).

"That represents a formidable platform and it was something someone had to buy," Cherry says.

Surviving the Sengstacke saga

When John Sengstacke died in 1997, he controlled about 70 percent of the company's stock. There were also shares owned by Frederick Sengstacke, John's brother, and minority shareholders that included John and Fred's sisters.

John gave trusteeship of his ownership to the Northern Trust Co. and named his grandchildren as beneficiaries. However, he specified that in the event obligations of the trust must be met, shares could be liquidated to satisfy those obligations. His beneficiaries didn't like this and they, led by his granddaughter, Myiti, fired Northern Trust.

"Basically, he did a poor job of estate planning. He received great advice, but just didn't take it," says Cherry.

And so the various family units got into a tussle that eventually landed in the hands of a Cook County, Illinois court. After three years the court-appointed trustee was unable to solve the problems of Sengstacke Enterprises and it was offered on the open market. That was in February 2000 and it wasn't until January 2003 that Real Times Inc. closed the deal.

Real Times purchased Sengstacke Enterprises for $3 million cash, a note for $3 million plus 12 percent over five years, a final payment of at least $2.5 million and assumption of all the debt, which is substantial.

"From 1997 to 2003, the company was leaderless and in the absence of leadership, it began to crumble under its own weight," says Cherry. "By the time we bought the company it was truly a money-losing operation. It has so many problems—with printers, trade creditors, the IRS—that it could have been in bankruptcy."

But Picou and Cherry saw a diamond in the rough. "It's the worst house on the best block," he says. And so Picou and Cherry set to work. "We've demanded that all of our publishers perform through implementation of best practices we know exist in modern newspaper management. This is no longer a family business," says Cherry.

In the few short months since Real Times purchased the Defender, it has formed a new board of directors, and plans to implement a new accounting system, new circulation systems, new content and format and a new editorial vision.

Picou serves as editor of the Defender and CEO of Real Times Inc. Cherry's role is to make sure that all five properties (a fifth paper, the Michigan Front Page, was added at the time of the Sengstacke purchase) stay focused. Each has a vision and business plan.

Each publisher is required to submit monthly forecasts and Cherry admits it's a bit of culture shock for them. "We need them to report how they are running their piece of the business," he says.

"We're running this business with kisses and threats," he jokes. e