News Corp. to acquire Newsday

Tribune Co. has reached a preliminary agreement with Rupert Murdoch’s News Corp. to sell control of Newsday of Long Island, the media conglomerate’s third-largest newspaper, in a deal valued at $580 million, according to people familiar with the negotiations.

A final agreement may not be announced for weeks because a number of details -- including the size of the stake Tribune would retain in Newsday -- have yet to be worked out, said an executive with one of the companies involved.

The transaction would enable News Corp. to operate Newsday as a joint venture with its money-losing New York Post, saving millions of dollars in printing and circulation costs and putting pressure on its crosstown tabloid rival, the New York Daily News. News Corp. also owns the Wall Street Journal, which it acquired last year in its controversial takeover of Dow Jones & Co.

Because News Corp. would emerge with three newspapers and two television stations in the New York market, the transaction would likely attract attention from federal regulators.

Tribune, the corporate parent of the Los Angeles Times, KTLA-TV Channel 5 and the Chicago Tribune, would retain a small ownership stake in Newsday, the 387,000-circulation daily it has owned since its 2000 acquisition of Times Mirror Co. Tribune’s stake would include some real estate, according to people familiar with the deal.

The debt-laden Chicago-based company would take in nearly the entire sale price of Newsday immediately using a complicated structure designed to avoid big capital-gains taxes that would come with a conventional sale, these people said.

Daily News owner Mortimer Zuckerman and cable-TV giant Cablevision Systems Corp. of Long Island were among those discussing potential rival bids for Newsday, but Murdoch has been the front-runner all along, said a person familiar with the negotiations.

Tribune Chairman and Chief Executive Sam Zell, the Chicago real-estate tycoon who took over the company in an $8.2-billion buyout in December, initially said that he wanted to keep all of the company’s nine newspapers and two dozen TV stations together, selling only the Chicago Cubs baseball team, its Wrigley Field home and the company’s stake in the regional sports network that broadcasts Cubs games.

But as the economy turned sour and Tribune’s newspapers continued posting doubt-digit year-over-year declines in advertising revenue, Zell acknowledged in a conference call last week with analysts that, as had already been widely reported, a Newsday divestiture was possible to help defray debt.

Tribune is hardly the only newspaper company suffering from the advertising recession. New York Times Co., which reported a losing quarter last week, has seen its stock decline by about 20% in the last year. Murdoch has made no secret of his intention to refashion the Wall Street Journal to compete directly with the New York Times on a national basis. On Tuesday at the New York Times Co.’s annual meeting, Chairman and Publisher Arthur Sulzberger Jr. shot down recent media reports that his company could merge with or be acquired by privately held Bloomberg.

“This company is not for sale,” Sulzberger told a crowd of shareholders that included his father, former Publisher Arthur Sulzberger Sr., and several other relatives who are directors or executives of the company. The company’s two-tiered stock structure -- a magnet for criticism by certain shareholder activists -- gives the Sulzberger family voting control despite its ownership of well less than half of the publicly-traded shares.

Bloomberg is the financial news and data company founded by New York Mayor Michael Bloomberg. The mayor, in a news conference Monday, had already issued his own denial, saying: “I am not going into the newspaper business.”

Also Tuesday, the top editor of the Wall Street Journal announced his resignation after just a year in the role. Managing Editor Marcus Brauchli, 46, said he would stay on as a consultant to News Corp.

There was immediate speculation that Brauchli had been forced out or had stepped away as a result of the changes Murdoch was imposing on the Journal to sharpen its competitive edge against the New York Times.

The Journal in recent months has increased its political and general-interest coverage, with political stories now frequently running on a front page traditionally dominated by business news.

“I am proud to have been part of this exceptionally talented team,” Brauchli said in a letter to the Journal staff Tuesday. “But now that the ownership transition has taken place, I have come to believe the new owners should have a managing editor of their choosing.”

A special committee charged with safeguarding the Journal’s editorial integrity issued a statement Tuesday saying that it had questioned Brauchli about his departure and that he “assured the committee that his decision had nothing to do with any integrity issue at the Journal.”

The panel was created as a condition of News Corp.’s $5.6- billion purchase of Dow Jones in December.

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thomas.mulligan@latimes.com