Jack Kent Cooke Set to Buy the Daily News

Directors of the Tribune Co. of Chicago agreed today to sell its newspaper in Van Nuys, the Daily News, to sports team owner Jack Kent Cooke for $176 million in cash.

The deal, which is expected to become final in the first three months of 1986, will end the 12-year newspaper presence in the Valley of the Tribune Co., publisher of the Chicago Tribune and the New York Daily News.

It also will bring the return of Cooke, 73, the former bandleader and clarinet player who built a media empire under the tutelage of Canadian press magnate Roy Thompson and later a sports empire including the Forum, the basketball Lakers and hockey Kings in Los Angeles and the football Redskins in Washington. Cooke sold the Forum, Lakers and Kings to real estate magnate Jerry Buss in 1979.

Cable TV Systems

The Tribune board also agreed today to sell nine cable television systems--including those in Lakewood and Palmdale--to Jones Intercable, a company from Englewood Colo, for $237.5 million.

Tribune Co. is selling the Daily News as a condition of its pending acquisition of Los Angeles television station KTLA Channel 5. Federal regulations prohibit owning a television station and a newspaper in the same market.

The two sales announced today will net Tribune roughly $413 million, going a long way toward easing the $510 million burden it took on to pay for KTLA.

“I think that the paper has a shiny future,” Cooke said, explaining the purchase in an interview from his farm in Middleburg, Va. Also, “I wanted to return to my first love, newspapers,” Cooke said. Earlier this year, he bid for but failed to acquire the Evening News Assn. in Detroit, publisher of the Detroit News. He was outbid by Gannett Co.

Came as Surprise

“The Daily News will be in good hands, and we thank the current management and employees of the Daily News for making the paper the success it is today,” said Stanton Cook, Tribune chairman.

Newspaper analysts and executives were surprised at the price Cooke is paying. John Morton, an analyst with the brokerage firm of Lynch, Jones & Ryan, said the price was about twice Daily News revenues, which is a common multiple for newspaper sales.

However, the price also is about 14 times the paper’s cash flow and equal to about $1,100 per subscriber. “As measured by circulation and cash flow, Cooke has paid at the high end of the range,” Morton said, “particularly in light of the fact that the paper has fairly intense competition from the metropolitan and also suburban papers around it.”

One newspaper executive who bid for the Daily News also was surprised at the price. “The operation needs a great deal of capital expansion in the printing facilities and the buildings,” the executive said.

Morton said the Daily News, circulation 150,403, made an operating profit of about $12.5 million last year on revenues of about between $90 million and $95 million.

That operating profit margin, between 13% and 14%, is low by newspaper industry standards. The newspaper industry overall in 1984 averaged 18%, according to the market research firm of Veronis Suhler & Associates, and small- and medium-sized newspaper usually do better than that.

Cooke apparently outbid at least three others for the Daily News. Those were Chronicle Publishing, a family-owned company that publishes the San Francisco Chronicle; A. H. Belo, a publicly owned company that publishes the Dallas Morning News, and a group of Daily News executives who tried to raise bank financing to buy the paper.

Cooke said he intends to keep the Daily News’ current management “absolutely lock stock and barrel,” including Daily News publisher Byron C. Campbell.

“I fully expect we will have an enjoyable relationship, and a profitable one,” Cooke said of Campbell.

Campbell, however, has a long association and a substantial number of shares in Tribune. His father, Chesser Campbell, succeeded Col. Robert R. McCormick as head of the company at McCormick’s death. Campbell declined to comment on his future with the paper, as did other executives.

Campbell issued a statement saying: “Jack Kent Cooke has a record of owning first class organizations that are highly successful . . . Under his ownership, the Daily News will continue to serve its readers and advertisers in this growing vital market.”

Cooke will add the Daily News to an empire that includes the Chrysler building in New York, cable television, the Washington Redskins, and a thoroughbred breeding farm in Kentucky.

Tribune acquired the Van Nuys newspaper in 1973. At the time, the Daily News was called the Valley News & Green Sheet, published four days a week and was distributed free to 276,000 homes around San Fernando Valley.

Tribune installed new management, changed the name and transformed the paper starting in 1975 into a suburban daily.

By 1983, however, Tribune apparently was dissatisfied with the progress. It summoned Daily News President and Publisher J. Scott Schmidt back to Chicago, to a job insiders later conceded involved little responsibility, and replaced him with the paper’s current publisher, Campbell. Campbell was heading the company’s Fort Lauderdale, Fla., papers.

The Daily News was posting an operating profit at the time of roughly $7 million on revenues of close to $70 million, according to those closely familiar with the books. Such an operating profit margin is only about 10%, well below industry standards.

Before long, Campbell had rattled the paper’s top management, replacing most of the department heads. Campbell replaced editor Bruce Winters, for instance, with Timothy Kelly, formerly No. 2 news executive of the Dallas Times Herald, a newspaper owned by Times Mirror, owner of the Los Angeles Times.

Campbell also continued to reverse the Daily News’ strategy of the early 1980s, when it began to call itself the Los Angeles Daily News and attempted to broaden its geographic appeal. Instead, Campbell tried, as Schmidt had done in his final days, to make the paper more local to the Valley, increasing the number and frequency of local sections called “Neighbors,” pages containing locally oriented news and advertising distributed only in certain communities.

Jones Intercable is the nation’s 17th-largest multiple cable system operator, owning or managing 69 systems in 21 states. The company was founded in 1970 by Glenn R. Jones, who is its chief executive.

In addition to the two Southern California systems, Jones is acquiring cable systems in Albuquerque, N.M., Tampa, Fla., Houghton, Mich., Glencoe and Owatonna, Minn., Milwalkie, Ore., and Alexandria, Va.

Tribune still plans to sell six remaining cable systems.

Tribune also owns two other papers in California, in Palo Alto and Escondido.