Wednesday, Nov. 13, 1985
Nation/World
University Daily Kansan
11
Mexican may purchase UPI
United Press International
WASHINGTON — United Press International's chairman, employees union and a committee of its key creditors will urge a bankruptcy judge to approve the sale of UP1 to Mexican newspaper publisher Mario Vazquez-Rana, joined by rival bidder Joe Russo as a minority partner, it was announced yesterday.
The agreement, achieved during marathon negotiations that began last week, appeared to clear the way for a turnaround for UPI, the nation's second largest news service, which has struggled against financial odds since requesting Chapter 11 bankruptcy protection on April 28.
UPI Chairman Luis Nogales said the $41 million sale proposal "guarantees UPI's future as a full-service, secure international news agency."
The proposal includes a pledge of $30 million in working capital, but Vazquez-Rana has vowed to invest the money it takes to make UPI profitable.
The alliance between Vazquez-Bana, president of the Mexican Olympic Committee, and Russo, a highly successful Houston real estate developer, broke an impasse which saw UPI executives seeking to choose among three competing bids.
The third group, a seven-member institutional consortium headed by the Financial News Network, Inc., a cable television concern, sought to establish a news channel after Vazquez-Rana and Russo revealed they had joined forces.
Company sources said Vazquez Rana, S3, one of Mexico's richest individuals, appeared to be winning the bidding war yesterday, but UPI reported earlier that reservations about foreign ownership of the 78-year-old news service.
Sources said monetary proposals of about $40 million from both Russo and the FNN group were weakened by contingencies and uncertainties about their commitments of cash.
Vazquez-Rana, owner of the El Sol group of 70 Mexican newspapers with a combined circulation of 2.1 million, persuaded UPI executives he could overcome worries about foreign ownership of the nation's second largest news service. He eased such concern among top UPI officials by accepting Russo, a highly successful Houston developer and civic leader, as a 10 percent partner, the sources said.
Vazquez-Rana also pledged to place UPI's operations under an independent board to preserve editorial independence. He told UPI's senior editors in an interview
last week, "News must not be manipulated. UPI will achieve profits by providing quality news reports. Independence is essential."
His representatives have said he has sought for more than three years to acquire UPI, and has plans to build it into a dominant world news organization.
Under the final settlement,
Vazquez-Rana and Russo will pay $21 million in cash to free UPI from bankruptcy proceedings; $9.5 million, or 40 cents on the dollar to the unsecured creditors owed about $22.8 million; $3.4 million to the Internal Revenue Service and state tax authorities for employee withholding taxes and other taxes UPI failed to pay in 1984 and early 1985; approximately $4 million to cover all bankruptcy claims filed by current and former employees; complete payment to all small creditors owed $3,000 or less, and all administrative costs of the bankruptcy proceedings.
Vazquez-Rana and Russo also reached a tentative contract accord with the Wire Service Guild representing 750 of UPI's domestic employees who were forced to accept temporary 25 percent wage cuts in 1984 to keep the company afloat.
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