WaPo Balks at Avenue Capital’s Proposed Newsweek Buy

Newsweek finally has a buyer but the Washington Post doesn’t want them.

Avenue Capital Group is considered a front runner to buy Newsweek, but Washington Post Co. is balking because the hedge fund’s planned partnership with American Media, publisher of the National Enquirer, according to The Wall Street Journal.

Avenue Capital wants to use American Media to handle advertising and other back-office functions, the WSJ says. AMI, which also publishes Star magazine, Shape and Muscle & Fitness, is backed by Avenue Capital and Angelo Gordon & Co.

The Washington Post is uneasy about Avenue’s proposal. Well, boo hoo. But a company with negative EBITDA that produced $56 million in operating losses in 2009 and an $11 million loss in first quarter shouldn’t be so… snooty.

Because of WaPo’s snobbery, other bidders, which include Sidney Harman and Fred Drasner, could move up. This isn’t fair. “WaPo has been very particular about who they sell to all along,” one banker says.

A private equity executive applauded Washington Post’s sense of “stewardship.” If Newsweek still had the cache and success it once did then WaPo woulnd’t be selling it, the source said. “Once you make a decision to sell then you’re a seller and you shouldn’t care that much who is the buyer,” the PE exec says. “And if its a PE fund [that is the buyer] then it doesn’t matter who else is in their portfolio.”

Newsweek was a great magazine (emphasis on the past tense). I just glanced at its website and saw reports on the reality show “Jersey Shore,” “CEOS Behaving Badly” and “What We Do For Beauty.”

In case anyone has forgotten, the National Enquirer was up for a Pulitzer recently for its reporting on John Edward’s baby mama drama. They didn’t win but that was one of the best stories in years.

It’s not like American Media will take over the editorial direction of Newsweek. If they did, this might lead to some pretty hilarious stories.

Officials for Avenue Capital and Washington Post Co. declined comment.