Tribune Co. (TRBAA:US)’s proposed spinoff of its newspapers will probably happen by midyear, allowing time to vet candidates to run a business that includes the Los Angeles Times and Chicago Tribune, people with knowledge of the matter said.
Chief Executive Officer Peter Liguori is eyeing the second quarter or early third quarter for the operation, which will convert the unit into a publicly traded company, according to two people with knowledge of the plans who asked not to be identified because the matter remains private.
Tribune is lining up a potential replacement should Eddy Hartenstein, the publisher of the Los Angeles Times and adviser to Liguori, decline to run the new company. Hartenstein, who is 63 years old, was appointed head of Tribune during its bankruptcy and was replaced by Liguori last year. The company hasn’t officially indicated when it will separate the newspapers or if the new entity’s stock will be traded. Tribune itself is traded on the over-the-counter market.
The company, which emerged from bankruptcy a year ago following a leveraged buyout from real estate developer Sam Zell, is hiving off its newspapers to focus on its more lucrative broadcast television properties.
Tribune shares rose 1.8 percent to $77.85 at the close in New York, the biggest one-day gain in almost two months.
Liguori, a veteran network executive formerly at Fox and Discovery, has expanded the company’s TV business, acquiring 19 broadcast stations for $2.73 billion last year. Chicago-based Tribune now has 42 stations in 33 markets, vying with Sinclair Broadcast Group Inc. and Gannett Co. to gobble up local stations. By increasing their size, broadcasters get more leverage in negotiations with pay-TV companies like Comcast Corp. and DirecTV that carry their signals.
“We’re going to be in 50 million homes,” Liguori said in an interview last November, citing his strategy to produce original programming for his stations. “We want to create content that we own.”
Tribune cut about 700 newspaper employees, or 6 percent of its total workforce, in November. The job eliminations came mostly in the newspaper’s corporate departments, according to one of the people. Liguori favored a simplified corporate structure, with newspapers sharing overhead costs and services, a move that has helped turn the publications into profitable units, according to the person.
Publishing revenue fell 4 percent to $446 million in the third quarter of 2013 from a year earlier, according to the most recently available financial statements. Even so, one financial measure showed gains for the newspapers. Earnings before interest, taxes, depreciation and amortization -- a key indicator of operating performance -- almost doubled in the period to $60 million.
Tribune’s publishing group was valued at about $623 million in its bankruptcy filings two years ago, about $300 million lower than a January 2011 estimate. In addition to the Los Angeles Times and the Chicago Tribune, the company also owns the Baltimore Sun, South Florida’s Sun Sentinel, the Orlando Sentinel, the Hartford Courant, the Morning Call of Allentown, Pennsylvania, and Daily Press of Newport News, Virginia
In spinning off its newspapers, Tribune is backing away from seeking an immediate bidder for the business. The company had hired advisers to evaluate interest from buyers, people with knowledge of the process said last year. Tribune could still sell its newspapers before the spinoff is complete, one of the people said.
News Corp., publisher of the Wall Street Journal, serves as both a model for Tribune’s spinoff proposal and a potential buyer for some of its newspapers. Billionaire Rupert Murdoch split up his media empire into a new publishing company last year and started it off with a war chest of $2.6 billion in cash to help foster the business.
Murdoch has expressed interest in the Los Angeles Times, people with knowledge of the matter said last year. The publication would add coverage of the entertainment business to a stable of papers that also includes the New York Post and the U.K.’s Sun.
The fate of the Los Angeles Times has drawn the attention of U.S. Representative Henry Waxman, a California Democrat, who met last month with Tribune executives to discuss the paper’s future. His concern about the “ongoing viability” of the publication “was not alleviated,” he said in a statement following the meeting. A subsequent meeting with Liguori also failed to assuage Waxman, the newspaper reported yesterday.
Tribune’s largest investors include Oaktree Capital Management LP, JPMorgan Chase & Co. and Angelo Gordon & Co.
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