Tribune called on to sell L.A. Times
Report says Los Angeles power elite turning up pressure, making offers, to try to pry Times away from Tribune Co.
NEW YORK (CNNMoney.com) -- Tribune Co. is under increasing pressure to sell its largest paper, the Los Angeles Times, according to published reports, just as the company is close to working out a truce with the Chandler family, the former owner of the paper and one of the company's largest shareholder.
The Wall Street Journal reports that several prominent Los Angeles billionaires are interested in buying the L.A. Times, the nation's No. 4 paper in terms of circulation.
Business leaders in Los Angeles are also joining together to urge Tribune Co. (Charts) not to make further staff and cost cuts at the paper, saying that it should sell the paper if it is not satisfied with results. The paper's editor and publisher were quoted in an L.A. Times story last week as saying they disagreed with Tribune Co. calls for further cuts.
The Tribune Co. bought the LA Times as part of its purchase of the Times Mirror Co. in 2000. The purchase made the Chandler family the company's No. 2 shareholder in Tribune Co., and made the newspaper publisher party to two complicated partnerships with the Chandlers, which could not be unwound until this month without negative tax consequences.
The Chicago Tribune, which is also owned by the Tribune Co. and the Journal, both reported Friday that the Chandlers and the Tribune Co. were close to a deal to unwind those partnerships, which could open the way to corporate moves such as spinning off television stations or selling newspapers.
The Tribune board meets Thursday, and the Journal reported Monday that Tribune Co. CEO Dennis FitzSimons is expected to deliver on a directive from the board to present a plan for the future of the media company.
Scott Smith, president of the company's newspaper unit, Tribune Publishing, seemed to dismiss the idea of a sale of the L.A. Times in an interview with the Journal. He told the paper he sees the Times and its staff as a central source of content for other Tribune Co. newspapers.
But the Journal reports that Eli Broad, philanthropist and founder of insurer SunAmerica, and supermarket magnate Ronald Burkle, recently sat down with representatives of the Chandler family and their investment bankers to discuss how they might structure a deal to purchase the Times from Tribune. However the paper reports people close to the Chandlers said these talks didn't go far.
In addition, entertainment industry mogul David Geffen made his own separate, informal, all-cash offer to buy the Times, according to people familiar with the situation.
In response to all three overtures, Mr. FitzSimons wrote a letter saying the board had decided unanimously to not discuss the transaction "at this time," according to a person who saw one copy.
Newspapers are still profitable; the Journal reports that the L.A. Times has an operating profit of 20 percent. But they are under pressure from declining readership and advertising revenue as they face competition from new media sources, such as the Internet.
Tribune stock is down nearly 40 percent since the end of 2003. The company took on debt to finance a $2 billion share buyback earlier this year to try to help share price, a move that was opposed by the Chandler family trust.
The Tribune Co. is not alone in seeing sharp share price decline over the last 12 months; No. 1 newspaper publisher Gannett Co .has (Charts) seen its stock fall even more sharply, dropping more than 20 percent in the last year, while the New York Times (Charts) has lost nearly 30 percent in that period. Shares of Journal publisher Dow Jones Co. (Charts) and the Washington Post (Charts) are also sharply lower.
Knight-Ridder, one of the nation's largest newspaper companies, was acquired by The McClatchy Company (Charts) earlier this year under pressure from shareholders to sell its assets to make up for share price declines there. Since that purchase, McClatchy has sold off several former Knight-Ridder papers, some to local ownership groups.