Cablevision Buys Long Island's Newsday
Updated from 2:24 p.m. EDT
Newsday
is out of reach for Rupert Murdoch.
Tribune
said Monday it will sell the Long Island-based tabloid for $650 million to
Cablevision
(CVC)
, the cable TV conglomerate based in the same New York suburb. Cablevision, controlled by the Dolan family, boasts 3.1 million subscribers in the metro area as well as ownership of Madison Square Garden, the NBA's New York Knicks, the NHL's New York Rangers.
Cablevision won a bidding war for
Newsday
against Murdoch's global media empire,
News Corp.
(NWS) - Get Report
, which owns the
New York Post
, and Mort Zuckerman, owner of the
New York Daily News
.
Both rival bidders had hoped to join the 11th largest newspaper in the U.S. with their New York-based tabloids in hopes of gaining the upper-hand in their ongoing metro newspaper war. News Corp. recently acquired
The Wall Street Journal
in a deal that drew heavy scrutiny from free press advocates, and the company may have faced regulatory problems if it had tried to add another New York newspaper to its portfolio.
In a terrible business climate for the newspaper industry, Cablevision faces scrutiny from its shareholders in the deal, but the company said owning Newsday will allow it to expand its reach to many households on Long Island and better promote its other businesses in local markets. Meanwhile, a deal with Cablevision is an easier sell for Tribune, given widespread criticisms of News Corp.'s editorial practices in the newspaper industry.
"We admire
Newsday's
strong editorial voice and reputation for quality as well as its leadership in print and online journalism," Cablevision Chairman Charles Dolan said in a statement. "We are committed to maintaining
Newsday's
journalistic integrity and important position in the marketplace."
Tribune's willingness to sell marks a reversal for Sam Zell, the Chicago real estate magnate who orchestrated a deal to acquire the newspaper chain last year using an employee-stock ownership plan. Originally, Zell said he intended to hold onto Tribune's newspaper and TV assets, but the accelerated deterioration of traditional business models in the newspaper industry has since changed his mind.
Tribune will retain a 3% stake in a tax-friendly joint venture it will form with Cablevision that will include
Newsday
, its Web site, some regional magazines and the free daily newspapers in the city,
amNewYork
. Cablevision will own 97% of the venture.
The deal will be financed by $650 million in debt provided by
Bank of America
(BAC) - Get Report
. Tribune will receive $612 million in cash, another $18 million in prepaid rent for leases for
Newsday's
real estate. The money will go towards paying down the Tribune's massive debt load, and its 3% stake in the venture will be valued at $20 million.
Tribune, struggling under a debt loan valued at $13 billion, paid $263 million in interest in the first quarter of this year.
Meanwhile, Tribune has other newspapers it could sell. Local buyers have expressed interest in
The Los Angeles Times
,
The Hartford Courant
and
The Baltimore Sun
.
By selling
Newsday
, Tribune will give up its position as the second-largest newspaper publisher in the U.S. behind
Gannett
(GCI) - Get Report
to
McClatchy
(MNI) - Get Report
, a company that's facing the wrath of shareholders after seeing its value plummet following the acquisition of several newspapers from the dissolved Knight-Ridder chain.
New York Times
(NYT) - Get Report
recently accepted two dissident shareholders onto its board of directors, reflecting pressure from public shareholders on the family-controlled company to restructure.
Cablevision shares were up fractionally to $23.68 in recent trading.