Times Mirror: Sun Deal Will Cut Into Profit
Its $600-million acquisition of the publisher of the Baltimore Sun will pare less than 20 cents per share from net income of Times Mirror Co. in 1987, the first full year following the acquisition, Times Mirror Chairman and Chief Executive Robert F. Erburu said Thursday.
The negative effect on earnings will continue, while diminishing, through 1990, Erburu told a meeting of securities analysts here. Times Mirror announced Wednesday that it will acquire A. S. Abell Co., privately held publisher of the Sun and two TV stations, for $600 million cash, in a deal that John Reidy, an industry analyst for Drexel Burnham Lambert, called “momentous.” The Sun, among the nation’s most honored newspapers, has been profitable in a market that analysts consider to be on the upswing.
Wall Street reacted to the acquisition with enthusiasm Thursday. On the New York Stock Exchange, Times Mirror shares soared $5.25 to close at $68.25, a 52-week high for the stock. About 193,300 shares were traded.
Erburu told the analysts that Times Mirror, publisher of the Los Angeles Times as well as Newsday in New York, the Dallas Times Herald, the Denver Post, the Hartford (Conn.) Courant and other newspapers, hopes to complete the Sun acquisition within three or four months.
Key to the timing is a review of the transaction by the Federal Communications Commission, which has jurisdiction because the acquisition includes A. S. Abell’s two television stations. One, WMAR-TV in Baltimore, will be sold in connection with the transaction because FCC rules do not permit a single buyer to acquire a newspaper and television station in the same market.
Times Mirror spokesmen said the 20-cent earnings dilution principally reflects the gradual writeoff of “goodwill,” or the excess of the purchase price over A. S. Abell’s net worth of more than $80 million. Times Mirror earned $237 million, or $3.49 per share, on revenue of $2.95 billion in 1985.
Erburu said the company still faces “sluggish economic conditions” affecting its newspaper markets in Los Angeles, Dallas and Denver.
Times Publisher Tom Johnson told the analysts that department store advertising in Southern California, as well as national advertising across the country, has been “soft” but added that he anticipates “record circulation, revenues and profits” at The Times in 1986, due in part to an economic rebound in the second half of the year and to “a number of expense controls” at the newspaper.