Rumor has it that News Corp — with a $2.5 billion cash kitty for acquisitions — may be mounting a new bid for the Los Angeles Times, the Chicago Tribune and the six other Tribune newspapers.
Rupert Murdoch and his company were first reported interested in the acquisition (in a story in the L.A. Times and elsewhere) when the papers were being shopped in late 2012 and early 2013.
No deal was struck, and last July Tribune announced that it would instead spin off the papers into a new publicly-traded company, Tribune Publishing. Tribune Publishing has recently hired a CEO and other staff, and the split is now scheduled to happen as soon as Aug. 4, but at least within the next several months.
I would not typically report a publishing rumor. This one could prove dead wrong. But a confidential tip that started this inquiry was more substantive than gossip on the street. Various circumstances would make such a deal logical for both buyer and seller.
Robert Willens, a New York-based corporate tax analyst who has previously commented on the spinoff plans, said in a phone interviews that a sale to News Corp would be plausible — but much more likely after the spinoff had been completed. In other words over the next year or two rather than in the next weeks or months.
Spokespersons for both Tribune and News Corp. declined to comment, citing corporate policies not to respond to sale rumors and speculation. Gary Weitman of Tribune said the company is committed to completing the spinoff (effectively ruling out a sale before).
So why is there reason to think such a deal might happen, later if not sooner?
Congressman Henry Waxman, who represents a Los Angeles district, has claimed that the deal terms are setting the newspapers for failure. A well-capitalized buyer could be an attractive alternative.
Tribune’s own announcement and commentary on the deal have highlighted that the publishing assets can be transferred to the new company tax-free. By contrast, direct sales of all or some of the papers out of the existing Tribune Company would come with a tax liability of hundreds of millions of dollars.
Besides the financial implications, tax consequences are a particularly sensitive consideration at Tribune, which is still sorting out a $200-million plus claim by the IRS related to its sale of Newsday in 2008.
If News Corp were to mount a bid after the spinoff, how soon could that happen? My sense is that a public company cannot be flipped like a real estate asset. Tax analyst Willens told me there is no statutory requirement to wait for a given period, but “if a plan had been agreed to or substantially negotiated” before completion of the spinoff, he said, “that could render it taxable.”
In the earlier attempt to acquire some or all of the Tribune papers, Murdoch faced a deal-killing regulatory barrier. Under Federal Communications Commission rules, his company could not acquire a paper in Los Angeles or other markets where his Fox News owned local stations.
While Murdoch and other publishers have long tried to get a waiver or repeal of the rule, he told a reporter at the 2013 Golden Globes awards, “it won’t get through with the Democratic administration in place.”
But that was before News Corp’s own corporate split. Now with newspaper holdings in the publishing spinoff and the local television stations part of 21st Century Fox, it could be argued that the joint ownership rule no longer applies (though Murdoch remains as executive chairman of News Corp. and chairman and CEO of 21st Century Fox).
Another open question is whether News Corp., given industry reverses, would make a big investment now in owning more American newspapers. Asked in a recent conference call with analysts what kind of acquisitions the company was seeking, CEO Robert Thomson replied:
I think it’s fair to say that the two guiding trends of our strategy generally are globalization and digitization. You’ve seen that with the first acquisition, Storyful, which has been very well received, both from an editorial perspective, but not just for our newspapers, from our digital sides particularly, but also from a commercial perspective because Storyful will be able to create content communities around products and companies. And I think you’ll see some of that in coming months. So (as) we said during the Investor Day, globalization and digitization, and that’s very much what the team is doing.
Tribune Publishing does not seem a fit with those goals, and perhaps Murdoch has less latitude to push his personal enthusiasm for print newspapers than he did when News Corp. made its premium bid for Dow Jones seven years ago.
Still the record shows the 83-year-old Murdoch to be persistent in stalking the trophy properties he wants, sometimes over decades. If the L.A. Times and the Chicago Tribune are still on his list, I wouldn’t bet against his mounting another bid. Read more