What’s the Next Step for Jack Kent Cooke? : Media: Sources say the magnate may spend his $300-million profit from a cable deal on newspapers. If so, it would be a return to his roots.

Marc B. Nathanson, chairman of Falcon Cable TV in Los Angeles, was recently having dinner at Madeo, a fashionable Italian restaurant in West Hollywood, when he saw his old friend Jack Kent Cooke. Nathanson worked for Cooke in the early 1970s, and now Nathanson’s company is part of a consortium of six firms buying Cooke’s cable TV business for $1.6 billion.

Cooke figures to earn about $300 million from the deal, and as the two chatted, Nathanson kidded Cooke about what he was going to do with the money. “He said with a twinkle in his eye, ‘I’ll find a way to spend it,’ ” Nathanson recalled.

Cooke has never had trouble spending money--or earning it. Forbes magazine pegs his net worth at more than $1 billion, and Cooke has made fortunes in newspapers, cable, real estate and sports. Even though he owns the Daily News in Woodland Hills, which competes with The Times, Southern Californians probably know Cooke best for his former ownership of the basketball Lakers and hockey Kings and for his building of the Forum in Inglewood.

Indeed, many of Cooke’s current holdings also have high-profile reputations. The Chrysler Building in New York City and the Washington Redskins football team are part of his empire, and he owns Elmendorf Farm, a horse breeding and racing farm in Lexington, Ky. Cooke lives mostly on a 640-acre farm in Middleburg, Va., although he just finished buying and remodeling a house in Bel-Air at a cost of roughly $8 million.

Cooke is 77 but he doesn’t give any signal of slowing down. So what will he do with the money from his cable TV sale? Cooke did not return repeated calls requesting an interview, nor did Daily News Publisher David J. Auger. James Lacher, who runs Cooke’s media properties, declined comment.

But R. Steven Morris, who was publisher of the Daily News from 1987 until last June, when he left after a falling-out with Cooke, said he knows the answer. “It’s blindingly clear what Cooke’s going to do. He is very interested in using the gains from the cable properties . . . to buy newspapers.”

If so, it would be a return to his roots. Cooke earned his first million by building a media empire with Canadian press magnate Lord Thomson. In addition to the Daily News, today Cooke owns at least seven small-town newspapers in places such as Socorro, N.M., and Steamboat Springs, Colo. And in recent years, Cooke unsuccessfully bid for such larger papers as the Detroit News, the Louisville (Ky.) Courier-Journal and the Bridgeport (Conn.) Post-Telegram, according to newspaper executives who asked not to be identified.

“His first love has always been the newspaper business, and it wouldn’t surprise me to see him expand his holdings,” said Alan I. Rothenberg, a Los Angeles lawyer who has represented Cooke at various times over the past 20 years.

Although Cooke’s empire is privately held, Cooke Media Group in Woodland Hills, which owns the Daily News and some of his cable businesses, must file financial statements with the Securities and Exchange Commission because it issued debt securities to the public. Those filings show that Cooke has proven to be deft at finding and developing assets that rapidly appreciate in value--even if they lose millions of dollars in the meantime.

For example, 2 1/2 years ago, Cooke bought cable systems scattered over 20 states from McCaw Cablevision and First Carolina Communications for about $1 billion, most of it borrowed. Because the company’s debt payments were so high--and because it carried large expenses for depreciation and other non-cash items--Cooke Media Group lost $21.5 million in 1986, lost $78.9 million in 1987 and lost $104.3 million in 1988, according to SEC filings. And as of June 30, Cooke Media’s debts were a hefty $950 million, contrasted with assets of $839 million.

No matter. The cable systems and newspaper threw off enough cash during those years to cover the debt payments. In the meantime, cable properties commanded higher and higher prices, so that Cooke, who paid $1,800 per subscriber for the systems, is selling them for $2,370 per subscriber, said Sharon Armbrust, a senior analyst at Paul Kagan Associates, a cable research firm in Carmel.

Cooke will get $1.6 billion for the cable companies--the deal should close next year--and after taxes and paying off the cable debts, it should net him at least $300 million.

Besides having the money to buy more newspapers if he chooses, Cooke has other things on his shopping list. He’s said he wants to build a new football stadium in Washington for his Redskins to boost their revenue. The team now plays in the antiquated, 55,750-seat RFK Stadium, which Cooke leases from the city. Formal plans have not yet been approved, but city officials say a new stadium, seating about 78,000, could cost Cooke $150 million.

Despite Cooke’s age, it seems unlikely that he will retire, which he has done more than once only to get bored. He once said, “Money is duller than peanut butter. Work is what’s exciting.” Cooke married his third wife, Suzanne, in 1987, when she was 31 and he was 74. But they were divorced the next year, shortly after she gave birth to a daughter.

Cooke has two adult children, but it’s unclear whether they will take over his empire. Son Ralph, 52, has been active at his father’s ranch, while son John, 47, is senior vice president and owns 10% of Jack Kent Cooke Inc., the family holding company based in Middleburg. (His father owns the rest.)

Some who know the elder Cooke doubt that John Cooke is being groomed to succeed his father. One Cooke colleague said that “if the mantle was being turned over, it would have been turned over long ago.” John Cooke also did not return calls seeking comment.

There’s no denying that John Cooke’s father, when he began his business career, was a young man in a hurry. The Canadian-born Cooke worked as an encyclopedia salesman and bandleader, then launched his investment career as a protege of Lord Thomson, whom he met in 1936. Over the next 13 years, the pair bought assorted newspapers, radio stations and magazines. Cooke continued running media properties until the early 1960s, when he moved to the United States. (He was made a U.S. citizen in 1960 by a special act of Congress.)

In 1965, he bought the Lakers for $5.2 million. Soon afterward he acquired a National Hockey League franchise and formed the Kings, and he built the Forum for $16 million. But in 1979, after divorcing his first wife of 42 years, Cooke sold the Lakers, the Kings and his 13,000-acre ranch in the Sierra foothills to Jerry Buss for $67.5 million.

Cooke also had been a major investor in Teleprompter, which by the mid-1970s was the nation’s biggest cable operator. But Teleprompter was nearly broke, prompting Cooke personally to take over active management of the company.

On one of Teleprompter’s darkest days, Cooke met with the company’s bankers, who were worried about whether he could salvage the operation. As recalled by Nathanson, Cooke took out his keys, dumped them on a table and told the bankers, “If you want to run it, here are the keys. If not, let me run it.” The bankers left the keys on the table. After Teleprompter was turned around, Cooke sold it to Westinghouse in 1981, with Cooke getting $76 million for his stock.

In recent years, Cooke has turned his attention back to newspapers. In December, 1985, he bought the Daily News for $176 million from the Tribune Co. And in the past couple of years Cooke’s Raljon Publishing Co. unit (named after his two sons) bought several small papers, many in resort towns, for undisclosed amounts.

Why would Cooke buy more newspapers? Morris said they are assets with the potential for climbing rapidly in value--the classic Cooke investment. Granted, newspapers lately have suffered from sluggish advertising revenue, as local TV, radio and catalogues increasingly compete for advertisers’ dollars. But even in economic recessions, “a daily newspaper that has maintained its franchise is the major advertising vehicle in its market,” said John Morton, a media analyst in Washington with the investment firm Lynch, Jones & Ryan.

As a result, daily newspapers a decade ago were sold at prices averaging about $1,000 per subscriber; today the price averages $1,500 to $2,500 per subscriber, Morton said. And with only 400 or so existing dailies that are not already part of newspaper chains, those that remain are in great demand--further bidding up their prices, he said.

When Cooke bought the Daily News, many thought he overpaid. The $176 million he offered was 44 times the newspaper’s 1985 profit, an exceptionally high multiple. And due to Cooke Media Group’s debts--Cooke borrowed $160 million of the purchase price--the Daily News has yet to turn a penny’s profit, according to SEC filings.

The newspaper’s pretax income from operations--before interest costs--fell to $98,000 in 1988 from $764,000 the previous year, even though its revenue last year climbed 10% to $105.1 million from $95.9 million. Add in the newspaper’s share of Cooke Media’s debt, and the Daily News had net losses of $18 million in 1988 and $14.7 million in 1987.

But Morris, the ex-Daily News publisher, said the paper’s operating cash flow--its income before depreciation and amortization charges, interest and taxes--was about $14 million a year when Cooke bought it. Today, the Daily News’ operating cash flow is more than $20 million, and newspapers are selling for 25 times that figure, he said.

Using that formula, the Daily News today might sell for $500 million, or nearly three times what Cooke paid. Another newspaper analyst said Morris’ sales figure was inflated by at least half. In either case, it underscores Cooke’s formula: Don’t worry about annual profits or losses, worry about how a business can jump in value whether it earns money or not.

If Cooke pays off much of the paper’s debt with cash from the cable sale, the Daily News’ performance could improve markedly. Cooke already is spending $53 million to build the Daily News a new printing plant, which will boost the paper’s press capacity by more than 50% when it opens within a few months. And the paper’s daily circulation has grown to 186,000 as of Sept. 30 from 143,200 before Cooke bought it.

Whether Cooke will sell the Daily News as he did the cable systems is unknown, of course, because the vision of Cooke’s operations rests with one man. And he’s not talking.