Through The Fly's Eyes: Newspapers

from Tedd Cohen of Theflyonthewall.com














Newspaper Musical Chairs: Will the Trib or Dow Jones Happen?

With all eyes focused on what the Bancroft family will finally do with its opportunity to sell Dow Jones & Co. (DJ) to Rupert Murdoch’s News Corp. (NWS) for $5B, comes word that the Tribune Company’s (TRB) sale to real estate billionaire Sam Zell may be in trouble.

Zell, of course, has a history of preying on weakness, and making a killing. Undoubtedly that’s what he saw in the Tribune Company as he made his $8.2B employee buyout move to take the company and its jewels such as the Chicago Tribune, Los Angeles Times, and of course, the Chicago Cubs. The Cubs are expected to be sold for about $1B.

But with newspaper classified ad linage in the tank, what price glory? To date, Zell has put in just $50M. The deal is set to close later in the year. But there is serious concern. He can walk away, but apparently is not yet ready to do so The LA Times is bleeding cash, as newspapers in general are suffering from declining readership. Then there’s the debt.

To make the deal work, Tribune has borrowed $7B to pay for the initial phase of the deal, and buy back shares. The catch was that $1.5B has to be paid back within two years just to get the loan. If, or whenever, the deal is approved by shareholders, and gets the nod from regulators, the Tribune Company must then come up with another $4.2B to purchase any shares outstanding that aren’t held by Trib employees.

Meanwhile, back in Boston, the Bancroft family, holders of 64% of the Dow Jones voting stock, continues to deliberate. It now appears that they won’t make a decision until the end of the week. The family is said to be “deeply” divided. Their stumbling block is anything but financial. It’s as keepers of the flame of journalistic independence in a sea of “content” providers. The financial side is overwhelmingly positive to Dow Jones shareholders. That’s why last week the board overwhelmingly recommended that they take it.