Times Mirror to Sell 80% of Newsprint Unit : Company Would Retain Northwest Timberlands

Times Mirror said Thursday that it has agreed to sell 80% of its Publishers Paper division to Jefferson Smurfit Corp., an Illinois paperboard and packaging products company, for $150 million.

The sale would divest Times Mirror of much of its newsprint and wood products operations, a goal of the company for several months. In addition to a 20% stake in Publishers Paper, however, Times Mirror would retain 272,000 acres of timberland in Oregon and Washington and its government lumber contracts.

“Since the housing market and then the newsprint business went sour,” said newspaper industry analyst John Morton, “these operations have been a drag on operations, made Times Mirror a much more cyclical company and kept its stock price down. We think this sale is a happy development.” Morton is an analyst with the Wall Street brokerage firm of Lynch, Jones & Ryan.

Despite apparently meeting one of the company’s goals, the sale would reduce Times Mirror’s 1985 earnings by $14 million, which analysts said suggests that the company is selling the paper company for below its book value.

“In light of what these operations have done to earnings in the past, I don’t think that amount of write-down is so bad,” Morton said.

Times Mirror would not comment on the the paper subsidiary’s book value.

Has Lost Money

Newsprint and forest products--the second-largest source of revenue for Times Mirror after newspapers--has lost money each year from 1981 through 1984. Last year, the division lost $12.8 million.

This year, fortunes appear happier. Unaudited statements for the first nine months of this year show that Publishers Paper--excluding the timberlands not included in the sale--earned pretax profits of about $24 million before interest payments on sales of about $300 million.

Times Mirror believed that it was close to selling all of its newsprint and wood products operations to Boise Cascade in March, but talks collapsed over tax problems, Times Mirror said at the time.

Publishers Paper supplies newsprint to Times Mirror’s Western newspapers, including the Los Angeles Times, and as part of the agreement Smurfit is expected to sign a contract to continue that supply.

Located in Illinois

Publishers Paper includes two newsprint mills, 12 paper recycling plants, four sawmills and two particleboard plants.

Smurfit, located in Alton, Ill., is a wholly owned subsidiary of Jefferson Smurfit Group Ltd., an Irish paper products company. Smurfit’s American subsidiary posted after-tax profits of $24.5 million last year on sales of $678 million. Smurfit’s total assets as of Sept. 30 were $344 million.

Smurfit is to pay $100 million in cash and deliver a promissory note for $50 million. The sale is expected to close in the first three months of 1986, pending a definitive agreement, government approval and a vote of the parent Smurfit company’s shareholders.

Times Mirror also said Thursday that the previously announced sale of three television stations and a microwave division--expected to become final in the first quarter of next year--will add about $105 million to earnings.