Tribune Co. of Chicago said Tuesday that it will sell its Van Nuys newspaper, the Daily News, to sports team owner Jack Kent Cooke for $176 million cash.
The deal, which is expected to become final in the first three months of 1986, will end the 12-year publishing presence in the Valley of Tribune Co., owner of the Chicago Tribune and the New York Daily News.
It also will mark the return to Los Angeles of Cooke, 73, the former bandleader and clarinet player who built a media empire under the tutelage of press magnate Roy Thomson of Canada and later a sports empire that included the Forum in Inglewood, 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, after he had divorced and moved to Las Vegas.
Tribune Co. also announced that it is selling nine cable television systems--including those in Lakewood and Palmdale--to Jones Intercable, a company based in Englewood, Colo., for $237.5 million.
Sources familiar with the Daily News sale said Cooke won the bidding with a dramatic last-minute maneuver. The official bids delivered to Tribune Co. last month were closer to $100 million--to the great disappointment of the board of directors. Cooke swept in with a new, drastically higher price, which, sources said, may have been delivered even as the board was considering the final offers Monday.
"What happens in an auction like this is that everybody plays by the rules and then the rules get changed if they don't like what happened," said one source, requesting anonymity.
Cooke declined to comment on the bidding process.
Tribune Co. is forced to sell 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 Tuesday will net Tribune Co. about $413 million, going a long way toward easing the burden of the $510 million it will 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., where he now resides. Also, "I wanted to return to my first love, newspapers," he added.
Considered High Price
Earlier this year Cooke bid for but failed to acquire the Evening News Assn. in Detroit, publisher of the Detroit News. He was outbid by Gannett Co.
Newspaper analysts and executives were surprised at the price Cooke agreed to pay, which is high by most measurements of newspaper value.
Cooke is paying an amount equal to about $1,100 per subscriber and 14 times last year's operating profit, said John Morton, an analyst with the Wall Street brokerage firm of Lynch, Jones & Ryan.
"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."
Said Gregory Kieselmann, an analyst with the Los Angeles brokerage firm of Morgan, Olmstead, Kennedy & Gardner: "I thought somewhere around $100 million was reasonable. It looks like he really wanted to get it badly."
One newspaper executive who bid for the Daily News also expected a lower price. "The operation needs a great deal of investment in the printing facilities and the buildings," said the executive, requesting anonymity. "Whatever you pay for the paper, I think it might ultimately cost you $50 million more."
Low Profit Ratio
Morton said the Daily News, which has a circulation of 150,403, made an operating profit of about $12.5 million last year on revenues of about $95 million.
That operating profit margin, roughly 13% of revenues, 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.
"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 Tribune Chairman Stanton Cook, who flew to Los Angeles Monday night to tell Daily News Publisher Byron C. Campbell that Cooke was the buyer.
Cooke said he intends to keep the Daily News' current management "absolutely lock, stock and barrel," including Campbell.
Staff Is Surprised
Campbell, however, has had a long association with Tribune Co. and owns a substantial number of shares of its stock. His father, Chesser Campbell, succeeded Col. Robert R. McCormick as president of the company. Campbell declined comment on his future with the Daily News, as did other executives of the Van Nuys-based paper.
Daily News staffers expressed surprise and relief at the sale.
"I don't think anybody took Jack Kent Cooke seriously as a bidder," said one editor. "This took a lot of people by surprise."
Said a reporter: "The fact he spent so much money is a vote of confidence in the newspaper (and) in the staff too."
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.
Cooke said he last owned newspapers in 1952, when he dissolved his partnership with Thomson Cooke Newspapers Ltd., which owned a series of mostly small papers in Canada.
Tribune Co. acquired the Daily News in 1973. At the time it was known as the Valley News & Green Sheet, published four days a week and distributed free to 276,000 homes in the San Fernando Valley.
The company installed new management, changed the name and in 1975 began to transform the paper into a suburban daily.
By 1983, however, the company apparently was dissatisfied with the progress. It summoned Daily News President and Publisher J. Scott Schmidt back to Chicago--to a job that insiders later conceded involved little responsibility--and replaced him with Campbell, who had been heading the company's papers in Fort Lauderdale, Fla.
Schmidt is now owner of Los Angeles-based fashion industry publications.
At the time, the Daily News was posting an annual operating profit of about $7 million on revenues of close to $70 million, according to those familiar with its books. That amounts to an operating profit margin equal to just 10% of revenues.
Before long, Campbell changed the paper's top management, replacing most of the department heads. 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.
Increased Suburban Coverage
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, which contain local news and advertising distributed only in specific suburban communities.
The buyer of Tribune's nine cable systems, 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 Tribune cable systems in Albuquerque, N.M., Tampa, Fla., Houghton, Mich., Glencoe and Owatonna, Minn., Milwaukie, Ore., and Alexandria, Va.
Tribune Co. still plans to sell six remaining cable systems. The company also owns two other papers in California--in Palo Alto and Escondido--as well as papers in Fort Lauderdale and Orlando, Fla. It also owns newsprint operations and has a growing presence in television broadcasting, production and distribution.
Times staff writer James Bates also contributed to this story.