Change of Command at U.S. News

By WILLIAM A. HENRY III

Atlantic's owner buys out the magazine's employees

Mortimer Zuckerman, the real estate magnate whose Park Avenue offices in New York City overlook the site of a 1 million-sq.-ft. tower that he is building, joked on the telephone to friends last week that he can now afford lunch only at "some place with a takeout counter." The reason: Zuckerman, 47, has agreed to pay $182.5 million in cash to acquire the parent company of U.S. News & World Report (circ. 2.1 million), a purchase that will vault him into the major leagues of American journalism. He will be the sole owner of the magazine, a conservative, no-nonsense weekly that emphasizes politics and the economy. Although he assured the staff that he would sustain the tradition that has built a loyal readership, he makes it clear that he bought U.S. News out of a personal desire to be involved. Says he: "I like the magazine's position. But I also like it because it is some thing I can work on."

Zuckerman, a witty, urbane socialite who raised funds for Senator Gary Hart's presidential campaign, might seem an unlikely buyer for U.S. News, a magazine that prides itself on a down-home flavor virtually devoid of literary flourishes and serves a predominantly Midwest and Sunbelt audience. Founded as a daily national newspaper in 1926 by David Lawrence, a syndicated columnist, it evolved into its present format after World War II. In contrast to TIME (U.S. circ. 4.6 million) and Newsweek (U.S. circ. 3 million), U.S. News downplays reportage of a week's events in favor of analysis of their impact on readers and gives scant, though increasing, attention to technology, culture and lifestyles.

The decision to sell the magazine brought a bittersweet experience to the employees, who hold most of the company's stock under a profit-sharing plan initiated by Lawrence: they gained a windfall but lost control. The process started last December, when a still anonymous bid brought into focus what had been just a complaint from a few retirees: that U.S. News was shortchanging departing staffers by sharply undervaluing the company's assets. These include a high-technology typesetting company and a pending hotel-and-office complex (started as a joint venture with Zuckerman) on U.S. News's 3.5-acre headquarters site in Washington. The directors, all employees themselves, felt obliged to seek bids and heard from more than 40 companies, including Hearst, Gannett and other media giants. Despite the magazine's modest and uneven record of profits and a 13.4% decline in advertising pages in the first quarter, Zuckerman offered $3,000 per share, more than seven times the price at which the company valued its stock a year ago.

Perhaps two dozen or more longtime managers, editors and writers could become instant millionaires when the transaction is approved by the staff and the Labor Department. Editor Marvin Stone, 60, and Managing Editor Lester Tanzer, 54, will each collect about $5 million; employees such as Circulation Clerk Evelyn Fox (43 years seniority) and Chauffeur Obadiah Person (39 years) will collect $400,000 or more.

As a Montreal schoolboy, the son of a tobacco and candy merchant, Zuckerman bought the New York Times every day. He recalls: "Public affairs, especially in the U.S., were my soap opera." He studied business at the University of Pennsylvania and law at Harvard, stayed in the U.S. to amass a fortune estimated at $150 million through construction ventures, and became a citizen in 1977. Says he: "The surprising thing is not that a real estate developer should enter publishing but that with my interests, I went into real estate in the first place. My success enabled me to come into publishing at just the right level." His first foray was the Atlantic. Since he took over in 1980, circulation has risen from 340,000 to 436,000, and advertising revenues have more than doubled. Editor William Whitworth, lured from The New Yorker, was granted an indulgent budget and produced headline-making pieces, notably a candid description from Budget Director David Stockman of the Reagan Administration's first months.

Zuckerman has urged Stone and other top U.S. News editors to stay, and he is aware that rapid changes in format might alienate readers. But if his actions at the Atlantic are any guide, he is apt to bring in a new editor. One likely candidate: Harold Evans, 55, the crusading former editor of the Times of London, whom Zuckerman recently hired as editor in chief of Atlantic Monthly Press. As Zuckerman points out, however, Evans is British "and is accustomed to a different system and style of journalism."

Zuckerman says his first priority is to revamp the blocky, word-crammed look of U.S. News. Other changes seem sure to follow. As a hands-on owner, he plans to participate in interviews with newsmakers, visit the magazine's bureaus (eight in the U.S., ten overseas), and read some of the copy before it is published.

He also intends to enhance coverage of business and of social issues, including the impact of new technologies on family life, agriculture and health. "U.S. News has a voice that can be refined and modulated, but the voice should not be lost," Zuckerman notes. "I believe in something Marvin Stone said to me: 'Magazines are like clocks--they get wound down regularly, and they should be wound up regularly.' "

--By William A. Henry III.

Reported by Patricia Delaney/Washington

With reporting by Patricia Delaney/Washington