Avenue’s ‘Enquirer’ Ties Sink Newsweek Bid

Jul 30 2010 | 12:00pm ET

Avenue Capital Group’s bid for Newsweek magazine has been imperiled by the hedge fund’s ties to the publisher of sensationalist grocery-store tabloid the National Enquirer.

The Washington Post Co., which is selling the august if highly-unprofitable news weekly, is uncomfortable with Avenue’s plans to involve American Media in the running of Newsweek. Avenue’s proposal would have AMI handle advertising and other back-office functions for Newsweek, The Wall Street Journal reports.

But the Post’s concerns were not eased by Avenue’s promise that AMI would have no ownership stake or editorial involvement in Newsweek, and that its back-office functions would be strictly laid out in a service agreement. Avenue owns a 20% stake in AMI, which also published Shape, Men’s Fitness and Star, and holds a seat on its board of directors.

Avenue had widely been seen as the front-runner for Newsweek. But the hedge fund now believes that audio-equipment mogul Sidney Harman is the favorite to buy the magazine.

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