Tribune to spin off L.A. Times, other papers into separate company
Tribune Co. announced plans Wednesday to spin off its beleaguered newspaper unit into a separate company, freeing the media conglomerate to focus on its more promising television and Internet properties.
The new entity, to be called Tribune Publishing Co., would include the Los Angeles Times, the Chicago Tribune and six other daily papers. All other assets, including the company’s real estate holdings and stakes in several Internet sites, would remain part of Tribune Co.
The spinoff would be tax-free to Tribune shareholders and could take as long as a year to complete.
Other media companies, notably Rupert Murdoch’s News Corp., have spun off their publishing units. The goal is to boost the stock market value of the broadcast properties by unshackling them from the newspapers, whose revenue has been declining sharply.
“Each will be a stronger company when separated from the other,” Peter Liguori, Tribune’s chief executive, said in a memo to employees. “… A company that is growing and succeeding on its own merits has a surer, clearer path forward, built on the ability to invest in and shape its own future.”
Until now, Tribune appeared to be taking steps to unload the newspapers in a private sale. In February, the company hired investment bankers to advise on a potential sale and vet potential buyers. Several prominent suitors, including industrialists Charles and David Koch, Murdoch and local philanthropist Eli Broad, have expressed interest, according to sources.
But the process has moved slowly and Tribune has yet to open the newspapers’ books to potential buyers. The papers still could be sold at any time and the idea of the spinoff abandoned.
Crucial details of the proposed spinoff have not been determined, including the leadership of the new company and its financial structure.
Symbolically, the split would mark a historic break with the newspaper business that has always been at the heart of Tribune.
The company was founded in 1847 as the parent of the Chicago Tribune. It acquired Times Mirror Co., the publisher of The Times, in 2000. Despite the woes facing newspapers, the publishing division still accounted for 64% of Tribune’s operating revenue last year.
The announcement reflects the forces buffeting the print media industry and the comparatively brighter prospects of the TV business.
Tribune has repeatedly signaled its intent to remake itself as a TV broadcaster since emerging from bankruptcy protection at the end of last year. Last week, it agreed to pay $2.7 billion to acquire 19 local TV stations across the country. That would give Tribune 42 stations in all, making the company one of the nation’s largest station operators.
A key issue for Tribune Publishing would be its financial structure.
The newspaper unit is profitable, but advertising has been eroding at a precipitous pace. Ad revenue skidded 9% in the first quarter, after declining 14.5% from 2010 to 2012. The company has slashed 2,200 jobs in the last three years.
Among the key questions to be answered: How much debt would the new company carry? And how much capital would it get as a financial underpinning?
News Corp. earmarked a hefty $2.6 billion in cash and no debt to its newspaper unit when its spinoff was completed last month. Tribune is likely to allocate a far smaller amount to Tribune Publishing.
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