Los Angeles Times, May 13, 2008
By Thomas S. Mulligan

Tribune Co. today announced an agreement to sell Long Island newspaper Newsday to Cablevision Systems Corp. for $650 million.

The deal will give Tribune $630 million in cash to pay down its nearly $13-billion debt. Two-thirds of that was incurred in December's $8.2-billion buyout of the company, which was orchestrated by Chicago real estate maverick Sam Zell. Tribune owns the Los Angeles Times, KTLA-TV Channel 5, the Chicago Tribune and other media properties around the country.

After the transaction, Cablevision will hold 97% of the equity and Tribune, 3%, the companies said in this morning's announcement.

"This agreement enables us to maximize the value of Newsday and still retain an interest in this valuable asset," Zell said in the joint statement. "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."

"We see this as a wonderful fit," Cablevision President and Chief Executive James L. Dolan said. "Adding Newsday Media Group's superb assets to Cablevision's portfolio presents a multitude of opportunities: to provide consumers with additional quality content on multiple platforms; expand advertising opportunities for both entities and attract a larger audience than either company could on its own."

Dolan said that the Newsday businesses would report to Cablevision Chief Operating Officer Tom Rutledge.

The agreement was signed in Chicago Sunday night after days-long negotiations.

The bidding for Long Island's biggest daily was spirited, considering that the newspaper industry has been battered by a severe advertising recession and fierce competition, especially for classified ads, from the Internet.

Rupert Murdoch's News Corp., which owns the New York Post, and Mortimer Zuckerman, owner of the New York Daily News, each offered $580 million. Winning Newsday -- whose daily circulation is 387,000 -- could have helped either man save millions of dollars by spreading printing, distribution and back-office costs across two papers.

After Cablevision came over the top with its $650-million bid, the tabloid rivals decided to back away. Murdoch announced his withdrawal Saturday, saying the deal had become "uneconomical." With Murdoch out of the running, Zuckerman may have believed that pursuing Newsday was no longer a strategic imperative.

Cablevision, also based on Long Island, said that by teaming with Newsday, it would be able to offer advertisers a choice of media platforms -- print, Internet and TV -- to more efficiently target their audiences. Newsday's reporting staff also is expected to add editorial muscle to Cablevision's local-news channel.

Cablevision also said it would be able to market Newsday more effectively because of its reach into hundreds of thousands of Long Island households, many of which don't subscribe to the newspaper.

Analysts, though, were skeptical that Cablevision could profitably exploit the synergies between TV and print, something that Tribune had been trying to do for years without much success.

Cablevision shares fell 45 cents to $24.52.

Under the terms of the deal, Tribune's contribution to the joint venture will be Newsday Media Group, consisting of Newsday and its Internet operation; AM New York, a free metro daily; Star Publishing, a chain of advertising shoppers; and Island Publications, which produces niche magazines on Long Island. Cablevision will contribute $650 million of newly issued bonds and guarantee a $650-million loan from Bank of America Corp., of which Tribune will receive $612 million in cash. Tribune also will receive $18 million in additional cash, representing prepaid rent on real estate leased by the joint venture, and keep a $20-million stake in the joint venture, according to the announcement.

The deal is expected to close in the third quarter.

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