Monday, May 12, 2008

Cablevision Announces Purchase Of Newsday

Cablevision Systems Corp. is expected to announce this morning an agreement to acquire Newsday from Tribune Co. in a $650-million deal that would create a regional news and advertising giant with a powerful grip on Long Island.

Charles Dolan, Cablevision's founder and chairman, who has long had an interest in Newsday, said in an interview last night that a few details were still being ironed out. He declined to discuss his plans for Newsday but said he would soon.

"I think they're just finishing things and we should hear something shortly," said Dolan, 81. "They have an infinite reservoir of minor details that they need to address ... There's a group and they're working very hard on it, and we're anticipating they'll be through shortly if they're not through already. I hope we'll be talking soon."

The agreement, which a source said was signed last night, calls for the creation of a joint venture in which Cablevision owns 97 percent of Newsday and its subsidiaries, with Tribune Co. retaining the remaining 3 percent, according to a source familiar with the transaction.

The deal will be financed with $650 million in Cablevision bonds underwritten by Bank of America. Cablevision would pay Tribune $612 million in cash and $18 million in rent payments for Newsday properties that Tribune will continue to own. In addition, Tribune's stake in the partnership is valued at $20 million, the source said.

The purchase is expected to be completed in late July or early August, the source added.

"This agreement enables us to maximize the value of Newsday and still retain an interest in this valuable asset," said Tribune chief executive Sam Zell. "The newspaper has a unique circulation base and a tremendously strong brand. I expect them to grow and flourish as a result of this new partnership."

The Chicago real estate magnate bought Tribune last year when he took the company private and created an employee stock ownership plan. However, this saddled Tribune with billions of dollars in additional debt that had led it to sell off assets, such as Newsday.

Cablevision, a latecomer to the bidding for Newsday, beat News Corp. chief Rupert Murdoch, one of the world's most influential media moguls. He bid $580 million for the newspaper and dropped out on Saturday, saying a deal had become "uneconomical." Daily News owner Mortimer Zuckerman also bid $580 million. Spokespeople for the Daily News declined to comment yesterday.

Cablevision would take possession of Newsday's print, online and affiliated media operations, including the commuter daily amNewYork and weekly shoppers in the Star Community Publishing family. Tribune would retain Newsday real estate, including the paper's Melville headquarters, printing operations and affiliated properties.

Spokesmen for Cablevision, Tribune and Newsday declined to comment. A source close to the cable operator said, "We see this as an excellent fit with Cablevision assets."

The source said Cablevision is interested in Newsday's advertising operations, including classified sales, and envisions using the newspaper to expand the amount of local advertising Cablevision sells on the hundreds of channels on its system.

Cablevision also sees opportunities to expand its Internet operations with Newsday content and brand.

The deal realizes a long-held ambition by Dolan to own Newsday. He and his son, James Dolan, Cablevision's chief executive, hand-delivered the $650-million bid to Tribune chief executive Sam Zell less than two weeks ago, a source said.

One person familiar with Cablevision's thinking said the combination of Newsday into Cablevision provides the company with a trove of ammunition needed in its battle with Verizon, which is crisscrossing the region with a fiber optic-based television network called FiOS.

Dennis Grabhorn, president of the Graphic Communications Conference, Local 406, which represents Newsday print-shop, delivery and editorial workers, said yesterday he had not heard from Cablevision officials. "We'll have to sit down and negotiate with them," he said, noting the current union contract extends to 2010. Though wary of dealing with owners outside the newspaper industry, Grabhorn said he was open to the new owners. "Maybe the Dolans might surprise me," he said.

Cablevision's ownership of Newsday would likely bring financial relief and perhaps more investment in the operations after years of cutbacks because of Tribune's fiscal problems, said Christopher Marangi, an analyst with Gabelli & Co. The firm, with an 8 percent stake in Cablevision, has advised against the sale as a distraction from Cablevision's long-term cable and television strategy.

Despite cutbacks, Newsday continues to be among the region's most profitable newspapers, earning almost $90 million last year on sales of $500 million. The New York Post is said to lose $50 million a year, while the Daily News is believed to be marginally profitable.

Marangi yesterday acknowledged Charles Dolan may have been smart to bid on Newsday at a time when the price for all newspapers is low because of the economy's downturn.

"It may be a savvy play - that newspapers aren't dead yet and he may know more than we think," Marangi said. "This should take some of the monetary pressure off of Newsday. They are not as leveraged and constrained as Tribune is."

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