What Tribune's Planned Split Means for Its Newspapers

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The media company recently explored a possible sale of its publishing assets, which include the L.A. Times and Chicago Tribune.

With Tribune Co. on Wednesday announcing a plan to split its newspaper and broadcasting businesses, Wall Street observers shared their takes on what the news means for the company's Los Angeles Times, Chicago Tribune and other papers.

After all, about six months ago, the media firm, led by CEO Peter Liguori, had hired J.P. Morgan and Evercore Partners to help it evaluate its strategic options for all its businesses, including a possible sale of all or some of its newspapers.

Two Wall Street folks suggested Wednesday that Tribune would likely still remain open to any newspaper acquisition offers.

"The L.A. Times and Chicago paper ought to attract some big-money individual or group who wants to save the paper," said Benchmark Co. analyst Ed Atorino, without naming specific names.

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Suggesting that Tribune would be open to any such approaches, he pointed out that Warren Buffett has recently joined the list of such saviors. The billionaire has signaled no interest in Tribune's big papers, though.

Another Wall Street observer, who didn't want to be named because Tribune isn't a publicly traded company and therefore not officially covered by any analysts, also said the firm would surely remain open to any "compelling purchase offers." He said, "Companies must always be open to good deal opportunities, and maybe the news of the split will bring out suitors for some of the publishing assets."

A media banker said there was talk earlier in the year about buyers that had approached Tribune about possible newspaper deals. He took the fact that the business separation was instead announced Wednesday as a sign that none of the possible deals was compelling enough.

The New York Times reported that deal books that typically get distributed by investment banks ahead of a sale hadn't gone out yet in the case of the Tribune papers. 

It said tax issues also played a role in the early considerations of a possible sale of the newspaper business. The mature nature of the papers could lead to taxes on a possible sale of all papers to come in well above $100 million, it said. A banker said that Tribune as the seller would likely want buyers to take on that cost.

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"The company is still likely to look at any proposals for the sale of certain papers though, both before and after the spinoff," the banker suggested, adding that the separation could also position the future newspaper-only business for future deals.

Most agreed that the planned spinoff would highlight the different business momentum at Tribune's broadcast and newspaper groups. "Of course, newspapers are in decline, [while] Tribune TV is in great position," said Atorino.

He also suggested that if the newspaper business becomes publicly traded, it would allow the company to highlight its performance.

Tribune said Wednesday that the spinoff of its newspaper arm will create two companies with revenue of more than $1 billion. Both will have "greater financial and operational focus, the ability to tailor its capital structure to its specific business needs and a management team dedicated to seizing strategic growth opportunities with maximum flexibility," it said.

In addition to the L.A. Times and Chicago Tribune, the new Tribune Publishing Co. will include The Baltimore Sun, the Sun Sentinel in South Florida, the Orlando Sentinel, The Hartford Courant, The Morning Call of Allentown, Pa., and the Daily Press of Newport News, Va.

The separate company would also get its own board of directors.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai