Months after Tribune announced it was exploring opportunities for its newspapers, including The Los Angeles Times and The Chicago Tribune, the company instead said on Wednesday that it would spin them off into a separate entity called the Tribune Publishing Company. In doing so, Tribune followed the example of Time Warner and News Corporation, which also recently announced spinoffs of their publishing businesses, even though print properties are the backbone of their companies.
“These companies were built on print. These guys are walking away from decades-long legacies. This is a big moment,” said Alan D. Mutter, a newspaper consultant who writes the blog Reflections of a Newsosaur. “It’s like everybody is saying, ‘We’re out.’ ”
By spinning off the newspapers instead of selling them, Tribune avoids the tax consequences of a sale in the near term while still allowing the company, now led by Peter Liguori, a longtime broadcasting executive, to focus its efforts on television, including 19 local stations that it acquired for $2.7 billion at the beginning of the month.
In making the announcement, Mr. Liguori said that “the separation is designed to allow each company to maximize its flexibility and competitiveness in a rapidly changing media environment.”
The spinoff of the newspapers leaves Tribune as largely a broadcasting company, which will include 42 local television stations and interests in the Food Network,Web sites like Classified Ventures and CareerBuilder and its real estate holdings, including the Tribune Tower in Chicago.
The new publishing company, which will have its own board and leadership, will include the Los Angeles and Chicago papers along with The Baltimore Sun, The Sun Sentinel in Florida, The Orlando Sentinel, The Hartford Courant and The Morning Call in Pennsylvania. The newspapers’ operational tie-ins with Tribune’s digital sites, a valuable part of the enterprise, will remain intact after the split.
The publishing side of Tribune actually had higher revenue than the broadcasting side in 2012 — $2 billion compared with $1.14 billion. But according to Ken Doctor, a newspaper analyst, publishing revenue at Tribune has dropped 51 percent from 2005 and 2011, mirroring the halving of revenue in the rest of the industry. The newspapers have had deep editorial cuts and a loss of luster after a debt-laden purchase by Sam Zell in 2007. In February, Tribune announced that it had hired Evercore Partners and JPMorgan Chase to look into the sale of its newspapers. Several bidders expressed interest, including Charles and David Koch, the conservative billionaires; Aaron Kushner, the owner of The Orange County Register; and a group led by Eli Broad, the Los Angeles billionaire. But the efforts to sell have proceeded slowly, and the financial deal books that generally precede a sale have yet to go out.
The spinoff does not preclude a quick sale of the newspapers, but because the necessary filings will take months to prepare and be followed by putting together a new board and leadership for the publishing enterprise, Tribune’s decision could push any sale further down the road.
Robert Willens, a longtime tax analyst who runs the firm Robert Willens L.L.C., said that Tribune could avoid roughly $250 million in taxes on the sale of its newspapers, which have been valued at roughly $623 million, by creating a separate company. He added that for the deal to pass muster with the Internal Revenue Service, Tribune just has to show that it has not had discussions over price with potential buyers for two years before the creation of the new company.
“People do spinoffs all the time for the purpose of avoiding taxes,” said Mr. Willens. “That’s the beauty of a spinoff. It permanently avoids the tax that would be payable on a more straightforward or conventional disposal of the business.”
The company, he noted, is already grappling with a $190 million tax bill, plus 20 percent penalty, on its sale of the Long Island newspaper Newsday to Cablevision in 2008. In its most recent earnings report, Tribune Company said that it also might have to pay an extra $225 million in taxes after the I.R.S. finishes auditing the company’s 2009 tax return over a sale of the Chicago Cubs baseball team.
Article source: http://www.nytimes.com/2013/07/11/business/media/tribune-co-to-split-in-two.html?partner=rss&emc=rss
