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 in the Tribune Company.
The move mirrors one by News Corporation, which this summer spun off its newspapers into a discrete division. 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, signalled last week that it saw a bright future in broadcasting when it purchased 19 television stations in 16 markets, bringing its total number of television stations to 42 and giving the company a large footprint in the local television business.
Initial efforts to sell the newspapers were hampered by significant tax implications - given the newspapers are mature businesses, the taxes on a sale of all the prosperities could reach over $100 million. The company has interests in large digital assets - 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 Co, will retain those assets, but the agreements will remain in place.
The spinoff 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.
In the announcement, Peter Liguori, CEO of the company, said that each division would be able to operate independently.
"The two companies resulting from this transaction would each have revenues in excess of $1 billion and significant operating cash flow," 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 dealbooks that generally precede a sale had yet to go out, leading to speculation that an outright sale was 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, which is subject to regulatory approval, will give Tribune Company time to shop the newspapers over a longer time frame.
Each of the new entities will have its own board of directors and senior management team.
© 2013 The New York Times News Service
