November 28, 2015

Media business reporter Rupert Murdoch has scooped us all with a tweet Friday saying he has “strong word” that Tribune Publishing is being sold to a Wall Street firm and the Los Angeles Times spun off to a local group.

Well, maybe.  As rumors go, this one has a certain plausibility.  Consider:

  • Oaktree Capital Management, the largest shareholder in Tribune Publishing with an 18 percent stake indicated earlier this month in a securities filing that it is considering selling its shares.  Earlier an Oaktree source was equivocal in support of CEO Jack Griffin’s year-plus tenure in which shares have lost more than half their value. So a starting point for a takeover would be gathering in that stake.
  • Philanthropist billionaire Eli Broad and some local allies have a standing and publicly expressed interest in bringing the Times under local ownership.  Former publisher Austin Beutner, who Griffin fired in September, has joined in the public pressure for a sale and at least initially seemed to be seeking to be reinstated as publisher.
  • As I wrote earlier, splitting off the L.A. Times makes no sense if the company continues to pursue Griffin’s strategy of centralizing and trying to build national advertising, print and digital. However, should a critical mass of institutional shareholders lose patience — and have an opportunity to exit at a premium price, they might jump at it.
  • I’m not seeing the appeal of running Tribune Publishing stripped of the L.A. Times.  But a purely financial buyer, with a generous payout from Broad’s group, could sell the remaining papers to local buyers or one of the several chains — like Gannett or New Media Investment Group — looking to expand.

There is reason for skepticism too, though. I’m not sure the papers are worth more separately than the company is as a whole. Admittedly bargain prices prevail these days, but the business is weak and hedge fund speculators have been burned — in Philadelphia and at Digital Media Group — in recent years.

It would be odd for the L.A. Times half of the transaction to be taking shape just as a buyout/layoff program there affecting many senior reporters and editors is being completed. Plus Tribune continues adding high-level execs to its team.

The Times is still integrating the Union Tribune of San Diego, purchased earlier this year, and has indicated it wants the chance to bid for Freedom Communications and the Orange County Register in bankruptcy court.  That is a better match for Griffin’s strategy than for a locally focused Broad group.

Murdoch is not exactly a disinterested outsider. Through the years, he has expressed interest in the L.A. Times. My sources said he took a careful look in the summer of 2014 before backing off because of the difficulty getting regulatory approval in a market where his News Corp. has television holdings.

Might he have an interest in stirring up speculation, nudging the company into play?  Might he see an opening for collaboration with Broad? I can’t trace out the scenario but I always believe in Murdoch, the determined wheeler and dealer, who pursues his prizes over decades.

There will be a referendum on the rumor Monday morning.  If Tribune Publishing shares take a big jump up at the opening bell, that means investors take the prospect of a premium sale seriously.  If there is little or no share price increase, consider Murdoch’s “strong word” heavily discounted.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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