Tribune to Split in 2, Spinning Off Its Newspapers

Ending months of speculation, the Tribune Company announced on Wednesday that it would spin off its newspapers, including The Los Angeles Times and The Chicago Tribune, into a separate division called Tribune Publishing Company. Its broadcasting properties would remain together with other assets in the Tribune Company.

The move mirrors one by News Corporation, which late last month formally separated its newspapers into a new company. The common motivation is an effort to separate high-value, high-return entertainment and television assets from newspapers, which face a difficult operating environment that has dragged down earnings.

The Tribune Company, which emerged from bankruptcy at the end of 2012, signaled last week that it was shifting its emphasis toward television when it purchased 19 stations in 16 markets, bringing its total number of television stations to 42 and giving the company a large footprint in the local TV business.

At the same time, the company has been exploring the sale of some or all of its newspapers. Initial efforts to sell have proceeded slowly, and a bidding process that was supposed to have begun by now has not. Speaking to investors after announcing the television acquisition last week, Peter Liguori, Tribune’s chief executive, said the company was still considering “all of our strategic options'’ regarding the newspapers.

One potential holdup on a sale is the tax implications; given that the newspapers are a mature businesses, the taxes on a sale of all the properties could reach well over $100 million.

The spinoff announced Wednesday does not preclude a sale of any or all of the newspapers, the company said, and executives are hoping that the announcement stirs interest in some of the properties and perhaps a greater willingness to shoulder some of the tax implications.

The company has interests in large digital assets like CareerBuilder.com and Classified Ventures that include publishing arrangements with the newspapers that would have been invalidated by a sale. The broadcast entity, which will continue to be called the Tribune Company, will retain those assets, but the agreements will remain in place.

In a news release early Wednesday, Mr. Liguori, said that each division would be able to operate independently. Each of the new entities will have its own board of directors and senior management team.

“The two companies resulting from this transaction would each have revenues in excess of $1 billion and significant operating cash flow,” Mr. Liguori said. “We expect that this transaction will serve our shareholders and employees well, and put these businesses in a strong position for continued success.”

The split, like News Corporation’s, is expected to take months and is subject to some regulatory approvals.

The company had retained Evercore Partners with an eye toward selling the newspapers, but the financial deal books that generally precede a sale had yet to go out, leading to speculation that an outright sale would be a complicated business proposition in the near term.

In addition, Mr. Liguori, an executive with a long history in broadcasting, has shown an increasing interest in the operational aspects of newspapers, indicating the company would likely not be selling them off wholesale. The split will give Tribune Company time to shop the newspapers over a longer time frame.

What had been envisioned as a straight-up auction of storied but troubled newspapers has been complicated by a business environment that is depressing values for newspaper properties, most remarkably large regional dailies that have been hit especially hard by changes in advertiser and consumer behavior. In October, The Tampa Tribune sold for a scant $9.5 million; the Philadelphia newspapers sold for $55 million in April 2012 after fetching $515 million in 2006.

Still, several people or groups of people have expressed interests in the Tribune Company’s newspapers, which have been valued at roughly $623 million and also include The Baltimore Sun, The Orlando Sentinel and The Hartford Courant. Charles and David Koch, the conservative billionaires, are among the most prominent potential bidders. Aaron Kushner, the owner of The Orange County Register, said last December that he was looking at the properties, and Douglas Manchester, owner of The San Diego Union-Tribune, has expressed interest in The Morning Call of Allentown, Pa., one of the smaller newspapers in the chain.

According to Ken Doctor, a newspaper analyst, publishing revenue at the company has dropped 51 percent between 2005 and 2011, mirroring the halving of revenue in the rest of the industry. The properties have suffered deep editorial cuts and a loss of luster after a debt-laden purchase of the newspapers by Sam Zell in 2007.

In a note to staff members, Mr. Liguori wrote: “For employees, stronger businesses mean more and better opportunities and the chance to have a more direct impact on the company’s performance. A company that is growing and succeeding on its own merits has a surer, clearer path forward, built on the ability to invest in and shape its own future.''

DealBook: Tribune to Buy 19 TV Stations Amid Groundswell of Consolidation

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Herald Tribune to Be Renamed The International New York Times

The New York Times Company said on Monday that it was planning to rename The International Herald Tribune, its 125-year-old newspaper based in Paris, and would also unveil a new Web site for international audiences.

Starting this fall, under the plan, the paper will be rechristened The International New York Times, reflecting the company’s intention to focus on its core New York Times newspaper and to build its international presence.

”This recognizes our global reach and is an exciting and logical move,” said Jill Abramson, the executive editor of The New York Times.

Mark Thompson, president and chief executive of The New York Times Company, said in a statement that the company recently explored its prospects with international audiences, and noted there was “significant potential to grow the number of New York Times subscribers outside of the United States.”

He added: “The digital revolution has turned The New York Times from being a great American newspaper to becoming one of the world’s best-known news providers. We want to exploit that opportunity.”

A Times Company spokeswoman would not provide details on how the name change would affect The International Herald Tribune’s employees. Currently, half of the staff members who work in Paris are subject to French labor law, while Herald Tribune employees spread throughout the rest of the world are governed by local labor laws.

The masthead of the paper will also change, the spokeswoman said, but she declined to elaborate.

Stephen Dunbar-Johnson, publisher of The International Herald Tribune, said in an interview that the name change was driven by “extensive research” showing that there was substantial potential, under the new name, to increase the number of international subscribers to the digital editions of The New York Times.

Mr. Dunbar-Johnson said the name change would be accompanied by new investments aimed at enhancing the paper’s international appeal. New employees will be hired to work on nytimes.com — currently the combined Web site of The New York Times and The Herald Tribune — in Europe and Asia, he said.

The renamed paper will remain based in Paris, where it was founded 125 years ago as the European edition of The New York Herald, Mr. Dunbar-Johnson. It will also keep its sizable office in Hong Kong where the Asian edition is edited. Mr. Dunbar-Johnson said there also would be investments in other locations. Until the fall it will continue to be published as The International Herald Tribune.

“Everyone at The New York Times thinks fundamentally that for this to be successful, the paper needs to be edited and curated for an international sensibility,” Mr. Dunbar-Johnson said. “The core attributes of The International Herald Tribune will be retained and refined.”

Through a series of ownership changes, the paper became The New York Herald Tribune, European Edition, in 1935. In 1967 it became The International Herald Tribune when The Times and the Washington Post Company invested in the paper to keep it afloat after The New York Herald Tribune folded. In 1991, the Post and Times companies became co-owners of the paper, and in 2003 The Times bought out The Post’s share and became its sole owner. The announcement is part of the company’s larger plan to focus on its core brand and build its international presence, the Times spokeswoman said. Last week, the Times Company said it was exploring offers to sell The Boston Globe and its other New England media properties. Last year, the company sold its stake in Indeed.com, a jobs search engine, and the About Group, the online resource company.

This article has been revised to reflect the following correction:

Correction: February 25, 2013

An earlier version of this article published online misstated the year when a predecessor to The International Herald Tribune first bore the name of The New York Herald Tribune for its European edition. It was 1935, not 1959.

Media Decoder Blog: Tribune, Bankruptcy Over, Is Expected to Sell Assets

 6:12 p.m. | Updated

Analysts and prospective buyers are preparing for horse trading to begin over the Tribune Company’s newspapers now that the company, whose holdings include The Los Angeles Times and The Chicago Tribune, has emerged from bankruptcy protection.

Tribune, which completed its bankruptcy paperwork on Monday, has not announced the sale of any assets, but it is likely to do so in the next several months so it can streamline its business, said Reed Phillips, managing partner of DeSilva & Phillips, a media banking firm.

The troubled state of the newspaper industry makes those assets most likely to be sold, he added. Less clear, however, is whether the company will sell them all at once or by region, for example selling The Chicago Tribune with Chicago magazine.

“The company is too large and complex right now, coming out of bankruptcy,” Mr. Phillips said. “What’s needed is a more focused strategy.”

Aaron Kushner, chief executive of Freedom Communications and publisher of The Orange County Register in California, confirmed on Monday that he was eager to buy Tribune’s newspapers. He would not say whether he had had any specific conversations with Tribune Company executives.

He said that from what he had gleaned from bankruptcy court filings and public pension documents, it seemed likely that Tribune would sell its newspapers as a group. That is because the company has such enormous and complex pension obligations and corporate overhead that it would be difficult to untangle them and sell properties individually.

“We’re interested in all of the papers, though obviously, from an outside perspective, we have not seen the numbers,” Mr. Kushner. “If papers are sold, someone has to be responsible for the pensions.”

The company’s reorganization plan was approved in July by the United States Bankruptcy Court in Delaware. It received final approval from the Federal Communications Commission in November.

The announcement on Monday ended a four-year process for the company. Its assets were tied up in court while the media industry continued its digital transformation. In a letter to employees, Eddy Hartenstein, the company’s chief executive, acknowledged that the last four years “have been a challenging period.”

“You have been resilient, dedicated to serving the company, our customers and your fellow employees,” he said. ”You are what sets Tribune apart from our competitors.”

The company also announced a seven-member board. The directors include Mr. Hartenstein and Peter Liguori, a former chief operating officer of Discovery Communications, who is expected to be named chief executive. Bruce Karsh, a founder of Oaktree Capital Management, which is a major shareholder in the company, also sits on the board, as does Ross Levinsohn, a former interim chief at Yahoo.

Tribune said it expected to resolve details about board members’ responsibilities at its first meeting in the next few weeks. The company is emerging from bankruptcy protection with a $300 million loan to finance its continuing operations, as well as a $1.1 billion loan to finance its reorganization. According to a company statement, Tribune plans to give former creditors 100 million shares of new class A common stock and new class B common stock.

The end of the bankruptcy has led to plenty of speculation about who might buy Tribune’s newspapers, with names like Rupert Murdoch and David Geffen floated as contenders. Mr. Phillips said he was skeptical that Mr. Murdoch would be a serious bidder because his company had so much else on its plate.

“I would think they would take a look,” said Mr. Phillips. “But when it comes to stepping up and making a substantial offer, I would be surprised. They’re already splitting off the publishing business from the entertainment business.”

He said that Mr. Geffen, too, would probably not acquire Tribune properties “unless the price is really attractive, because he’s not someone who has run a newspaper company previously. So I think it will be more of a challenge. The price he’s probably willing to pay based on advice from his advisers is going to be lower than what someone else is willing to pay.”

Mr. Kushner praised Tribune’s board and said he expected that “one of the first things that they’ll be trying to figure out is how the different parts of the Tribune company really work well together or separately.”

Mr. Kushner, who bought The Orange County Register last summer, said he was focused on buying large metropolitan newspapers. He said that while Tribune newspapers appeared to be profitable, how they would remain profitable was unclear, as with many newspapers.
At The Register, Mr. Kushner said, he tried to increase revenue by strengthening relationships with subscribers.

For example, he said, the newspaper gave its readers more value by increasing its pages 40 percent in the last year. It also spent $12.4 million sending $100 checks to its subscribers that they could in turn make payable to favorite local nonprofit groups. He said enhancing a paper’s relationship with subscribers would help drive subscriptions and, ultimately, advertising.

“Our basic view is that we add more value,” said Mr. Kushner. “This is the only path that we can have revenue grow.”