Rupert Murdoch's News Corp. has an agreement in principle to acquire control of Tribune Co.'s Long Island, N.Y.-based daily newspaper, Newsday, sources said late Monday.
While the sources cautioned terms were not yet final, the complex transaction would have Tribune Co., led by Chairman Sam Zell, selling a majority of the paper to News Corp. for about $580 million, with the deal structured in a way designed to reduce Tribune's taxable capital gains.
Tribune Co. would retain a small stake in the Melville, N.Y., paper and "some of the pieces," including the paper's real estate, a source said.
One source said there was only "clean-up work" remaining and expected an official announcement soon. Another said it could be weeks before a contract is signed and was concerned about requisite regulatory approval, pointing out: "It's one thing for Rupert and Sam to work out an agreement. It's still up to the battery of lawyers to work out the finer points."
A spokesman for Tribune Co. declined to comment. News Corp. spokesmen did not respond to inquiries. Murdoch, whose News Corp. holdƒรจ ings in the New York City market include the New York Post, The Wall Street Journal and two television stations, long has coveted the efficiencies that ownership or a partnership with Newsday would provide, predicting they would nudge the Post toward profitability.
Billionaire Zell, who became Tribune Co. chairman and chief executive late last year after engineering a highly leveraged $8.2 billion deal to take private the Chicago-based media concern, parent of the Chicago Tribune, has had to reconsider plans to keep the company's core assets intact in light of the company's worse-than-expected double-digit newspaper revenue declines.
Tribune has a $650 million debt obligation due Dec. 4, as well as about $250 million in medium-term notes due in 2008. The plan is to satisfy those obligations by drawing down a line of credit.
Zell said in a conference call with creditors last week he did not anticipate "trouble meeting our commitments going forward," but he also said the company was now "forced to consider the possible divestiture of some of our assets."
Previously published reports had identified Murdoch's News Corp. and Mort Zuckerman, owner of the New York Daily News, as among those interested in Newsday. Zell noted "keen" interest in the paper, and told the creditors Tribune Co. was still trying to determine whether a deal of any kind made sense.
Newsday had a paid circulation average of 387,563 weekdays and 454,194 Sundays for the six months ended in September, according to the Schaumburg-based Audit Bureau of Circulations. The Post averaged 667,119 weekdays and 405,486 Sundays.
The paper has been part of Tribune Co. since its 2000 acquisition of Los Angeles-based Times Mirror Co. It was cited at that time as integral to a national strategy that gave Tribune, which already owned New York's WPIX-TV, both newspapers and television outlets in each of the nation's three largest media markets.
Many of the anticipated benefits of that synergy were never realized, however.
philrosenthal@tribune.com
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