Zuckerman matches Murdoch's $580M bid

The owners of rival NYC papers The New York Post and NY Daily News appear to be headed for a bidding war for Newsday even as the News Corp/Tribune deal is reported to be near completion. According to this AP story, Mortimer Zuckerman submitted his offer late Friday.

The Post and Daily News circulate mainly in the New York City area, while Newsday is read mostly in neighboring Long Island. That would offer either bidder the potential of selling advertisers a broad reach of readers in a single ad buy.

It is widely thought that any News Corp. deal would be met with scrutiny by regulators and consumer groups concerned that Murdoch's company would be getting too much control over the New York media market, where News Corp. also owns two local television stations.

It doesn't matter which of the tycoons wins Zell's nod, both face DOJ antitrust reviews. But Zuckerman thinks he can argue that his bid "is more attractive because it does not have the potential to fall into regulatory limbo."

Faced with $1B in debt service costs this year, Tribune is looking for cash. Fast. In a quick deal (21 days) the company closed Tuesday on a $30M sale of the buildings that are home to the Stamford Advocate and Greenwich Times, papers Tribune sold last November.

Timing – if not terms – may favor Zuckerman.

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Smoke? Use your best judgement

You should quit, of course. But if you can't — or won't — at least the new Tribune has determined that the old Tribune's policy of charging you an additional $100 a month for health insurance is "inconsistent" with the new culture it's developing. From today's Tribune memo posted at Reuters Blogs:

While well-intentioned, we think the tobacco-use fee implemented by the previous management team is inconsistent with the new culture we’re developing-we’d rather you use your own judgment when it comes to tobacco use, not impose ours upon you.
[snip]
If you’re still being charged the fee, it will stop and Tribune will reimburse you 100 percent for the fees you have paid. This reimbursement will occur in late May.

No change on the spousal medical fee.

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An agreement in principle

Reports are that Newsday will be become a "joint venture" with the New York Post. Terms aren't yet final of the complex deal that will give Murdoch a majority ownership of Tribune-owned Newsday and Zell the smaller stake and about $560 million in cash. From the Chicago Tribune:

One source said there was only "clean-up work" remaining and expected an official announcement soon. Another said it could be weeks before a contract is signed and was concerned about requisite regulatory approval, pointing out: "It's one thing for Rupert and Sam to work out an agreement. It's still up to the battery of lawyers to work out the finer points."

Other than the price, the media moguls have reportedly come to an informal agreement on structure and governance. More at WSJ

Newsday's union members were speculating about sale a couple of months ago when unionized workers at the New York Post alerted them to a possible deal.

Dennis Grabhorn, president of Local 406, which represents many Newsday employees, said members have been discussing several possible configurations under which the Post could partner with Newsday, which already distributes the Post on its trucks.
[snip]
"I'll take any of the three" bidders named in Friday's news reports," said Grabhorn, but "the only one that is a real newspaper person is Rupert Murdoch."

Who would have ever thought newspaper workers would look to Murdoch as their top choice for employer?

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'Breath-of-fresh-air' Zell forced to consider sale of assets

The company's solvency is threatened as a result of advertising declines. In the conference call with today with bankers and journalists, Zell said the "significant erosion of revenue" has forced the company "to consider the divestiture of some of our assets."

So now that Tribune has divested itself of people assets through a long series of buyouts (and rumors are circulating that layoffs may be on the horizon even as more executive assets are being hired) properties are next: Newsday could be let go in a non-cash asset swap deal that could save hundreds of millions in capital gains taxes.

Jeff Bercovici at Portfolio.com reports "Zell says his underlings love his attitude".

"In the 3,000 emails I've received, all of which I read all of which I answered, perhaps the most common phrase in those emails is, quote, a breath of fresh air," he said. "We are changing the culture, we are changing the environment, and we are changing everyone's goals."

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Is Geffen still in the picture?

Nikke Finke at Deadline Hollywood has a source that says Geffen and Zell are “in serious discussions” regarding a sale of the Los Angeles Times. “It's all very hush-hush,” Finke writes on her blog, “but my source tells me: ‘Cash flow is not being met for the bankers, revenue is in freefall, and the potential liability on the Combs story is huge. Sam feels he bought a bill of goods. Geffen is back in the mix and he's going to get it for a deep discount. They're in serious discussions.’ ”

Could be Geffen is following up on last April's dinner with Zell.

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Trib-ulations

Last year when Zell bought Tribune he said he didn't buy the company "to figure out what to get rid of." But things have gone from bad to worse in our industry since the completed Zell Deal tied up your retirement funds without asking you.

The company struggles under $12.8 billion in debt, faces risk of credit default and according to today's NYT story, analysts say Zell needs to get rid of "both the Cubs and another major asset like Newsday, and relatively soon, to remain solvent."

Last year, the company had earnings (before interest, tax, depreciation and amortization) of about $1.2 billion. But 2008 is expected to be more difficult, and the company’s bond covenants require it to have earnings around $1.1 billion or risk being declared in default — even if it has the cash to make its interest payments.

Tribune’s credit rating has slipped several notches below investment grade, and its bonds are trading far below their face value, signaling that the market sees a high risk of default. The company’s long-term, unsecured debt can be bought for less than 50 cents on the dollar.

The company has scheduled a conference call with bankers on April 17 to discuss Tribune's finances. You should be on that call, too. It's your company, your money and your retirement fund at risk.

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Parting shots

Some use their farewell emails to tell Zell things they didn't tell him on "Talk to Sam" – maybe because they have more class than he? At LAObserved:

... Mr. Zell, please don't confuse arrogance with a commitment to something grander than the real estate in which we're housed or to the dollars in our ESOP. You want people to "Talk to Sam" but not to "Talkback to Sam." Perhaps that's a closer definition of arrogance.

Politics desk researcher Nona Yates nailed it:

The value in "this product" is produced right here, in the newsroom. It's the reporters, editors, photographers, researchers, librarians, artists and all the others who bring value to this paper and make it one of the best in the country. And that's in spite of the turmoil foisted upon us for the last several years. It's not the flash, not the investment bankers, or wall street or some yahoo sitting in a corporate office. People buy and read this newspaper for the news, the content that is created and distributed each and every day in whatever medium. Anyone who thinks otherwise is an idiot and screw 'em."

Amen.

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Forget silly pep talks – how about ESOP info?

Despite the recent LAT reporting controversey, former Times city editor Bill Boyarsky blogging at LAObserved defends an LAT staff he thinks is "incredibly dedicated not only for slogging along but for doing some fine work for a paper that once seemed indestructible but now looks like a house of cards." Referring to Zell's own claim to be Viagra the 126-year-old LAT needs, Boyarsky writes:

I don't know about Sam, but the Times doesn't need Viagra. It needs journalists who can go to work each day without worrying about looking for a new job or whether they'll wind up with any money in the Employee Stock Ownership Program that Zell used to buy Tribune Co.

[snip]

Instead of silly pep talks, Sam ought to fire off some e-mails providing transparency on the ESOP deal.

Fat chance. The Zell Deal uses their money and gambles with their futures, but most employees didn't have a choice and don't have a voice in the ESOP. With $10 billion in debt hanging over Tribune employee heads, is it any wonder some Newsday staffers hope Murdoch takes over their paper?

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Murdoch wants Newsday * **

Is a bid for the Long Island paper in play? Will the two media barons make a deal?

Crain's NY has this: "Mr. Murdoch has long had an interest in Newsday. A year ago, around the time that Tribune was exploring a sale of the entire company, he tried to establish a joint operating agreement between the Tribune paper and News Corp.’s New York Post. He told analysts and others that the agreement would create “a very, very powerful combination for advertisers” and turn the money-losing Post into a viable business “in five minutes.”

*Update: Insiders say Murdoch has competition for the buy: media mogul Mort Zuckerman (Daily News) and James L. Dolan (Cablevision). No word on the price, but analysts say Newsday could be worth $350-$400 million. NYT

** Representatives from Rupert Murdoch's New York Post discussed a possible acquisition of Newsday from the debt-laden Tribune Co. as early as late February or early March, sources said Friday. Newsday

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$79M 4Q loss

The full 2007 details are in this Tribune report in which Zell said in part, "In addition, we have begun a strategic review of certain Tribune assets to determine whether capital can be more effectively redeployed into our core operations or toward reducing our outstanding leverage."

Selling assets is part of Zell's strategy to turn the highly-leveraged company around: The old Tribune sold the Stamford Advocate and the Greenwich Times last November, but the offices and production plants weren't part of the deal. They're on the block now. Price tag unknown at this time.

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Newsday avoids involuntary exits

Thirty-six accepted buyouts in the newsroom., including some veteran critics.

At the end of February, Tribune wanted to eliminate 120 Newsday jobs, including 25 unionized editorial folks, 10 editors and the 4-person national desk.

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Zell to sell?

He's not ruling out the possibilty of selling off assets. At a meeting with Baltimore Sun employees Thursday, he was asked if he'd sell The Sun. “I don't know. The goal was to keep all of the assets together.” But those goals were set with the expectation that revenue would be down 2 percent to 3 percent year over year, he said, not the 16 percent to 18 percent decline Tribune newspapers are experiencing. “If that trend continues, we may have to re-evaluate a lot of our decisions.”

Besides looking to sell off Wrigley Field and the Cubs, Zell is “evaluating what to do with The Sun's real estate holdings, including its headquarters, Port Covington printing plant and leased space for its Web operations.”

"That land on the bay is worth a lot," he said, referring to the printing plant, which sits on nearly 60 acres near the Middle Branch.

Buying and selling properties is how Zell made his fortune. Gotta hope that Zell's business strategy will ultimately provide healthy returns for Tribune workers — soon.

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Laid-off CA editor appeals to academia to help save journalism

We read at LAObserved that laid-off MediaNews columnist and former LAT editor Wes Hughes has appealed in a letter to Stanford University president John Hennessey to "take on the problem of how to preserve public and investigative journalism with the same seriousness academia addressed global warming, because it is that desperate."

I’m sure it hasn’t escaped you that the newspaper industry is imploding as I write this. The Los Angeles Times for example has lost a full one-third of its circulation and its news staff has been reduced accordingly. The same is true at practically every other newspaper in the United States and the television news business isn’t far behind.

Sam Zell bought the Tribune Company for a pittance, leveraging the employees’ stock holdings to swing the deal and they threw in the once-proud L.A. Times as a sweetener.
Across the country, the barbarians are at the gates of the New York Times and if that great daily should fall, I fear for the future of America.

His letter is cc'd to Sam Zell, Dean Singleton and other prominent newspaper owners who are worried more about sliding double-digit profits than journalists' alarms that American democracy is in peril because of drastic cuts to newsroom resources. Plunging ad revenue, a major the reason for the cuts, isn't likely to reverse course any time soon given the current economic climate, so help from any corner should be welcome.

Can Stanford help save watchdog journalism from corporate greed? Maybe it can come up with a new, innovative business blueprint for media companies that will preserve investigative journalism and increase financial prosperity. We need both.

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Save a Chicago tradition — or save jobs?

Zell is under heavy fire for his revenue-generating plans to add more night games and concerts to Wrigley Field's schedule. But his plan to sell naming rights to the stadium that is home of the Chicago Cubs, has been met with angst and outrage from Chicagoans and baseball fans across the nation.

Chicago Sun-Times columnist Carol Marin thinks Zell is the embodiment of Dr. Seuss' Sam-I-Am (Green Eggs and Ham): "Though Seuss' Green Eggs and Ham was written in 1960, the brilliant children's author apparently could see into the future. He must have had a premonition about what was going to happen in Chicago. That a billionaire named Sam-I-am Zell -- who lives in a Grinch perch high atop Michigan Avenue -- would look down one day at this great city on the lake and say to himself, "Hey, I think I'll buy it." Piece by piece. Including the Chicago Tribune. The Cubs. Wrigley Field."

But not everyone thinks selling the Cubs, the field or the naming rights to the Chicago landmark is such a bad idea. Baltimore Sun sports blogger Bill Ordine points out: "The responsibility is not Zell's or that of Tribune employees across the country to preserve Chicago baseball tradition. The Wrigley company, which is based in Chicago,  has been getting that free ride for a long time."

Zell's main responsibility here is to the Tribune company as a whole, its employees and customers, in making a tough business deal work. Like newspapers all over the country, Tribune properties have been downsizing -- and not just reporters and editors but advertising, circulation and business-side people. White-collar jobs, blue-collar jobs, in big cities, medium-sized cities and small towns, are on the line.

We're with you, Bill!

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Newsday staff reductions will affect 120* company-wide

*Updated Feb.29: 25 unionzed editorial staffers, 10 top editors and the entire national desk New York Post

Employees learned Thursday that non-union and union positions will be eliminated, with some workers' departure effective immediately. Other employees will have until the end of March. The reduction will be just under 5% of the current 2,300 employees.

The dreaded but expected news was outlined in a memo to employees from publisher Timothy P. Knight: "These difficult actions are based on our urgent need to focus on the things that drive audience and revenue growth, while we manage through a soft advertising revenue environment that requires us to significantly reduce costs. ... Though we all know we will not grow by cutting, we have no choice but to respond to the revenue decline and make cost adjustments now."

Elimination of positions in editorial, transportation and the pressroom will be done in accordance with the union contracts.

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