Tribune Co.‘s plan to spin off its newspapers, including the Los Angeles Times and Chicago Tribune, into a stand-alone publishing company follows in the footsteps of Rupert Murdoch‘s News Corp. – and other media companies.
Nearly two weeks ago, News Corp. divided into two separate companies: 21st Century Fox and the much smaller publishing group News Corp. 21st Century Fox contains the hugely profitabletelevision networks, including Fox News Channel and Fox Broadcasting, 20th Century Fox movie studio and interests in satellite TV services around the globe.
Chicago-based Tribune said Wednesday it would separate its eight daily newspapers, which include the Baltimore Sun, Orlando Sentinel, Sun-Sentinel of South Florida, Hartford Courant, the Morning Call in Pennsylvania and the Daily Press in Virginia, to create a new company called Tribune Publishing.
The faster growing assets, including television stations, WGN America and Tribune’s interests in Internet classified ventures, including CareerBuilder, and the cable channel Food Network, will make up Tribune Co.
Shares of the TV-focused Tribune company are expected to be listed on a major stock exchange.
The new News Corp. boasts dozens of newspapers, including the Wall Street Journal, New York Post, Times of London, the Australian, the U.S. book publishing house HarperCollins and a nascent educational materials business.
Murdoch provided News Corp. with a strong balance sheet with $2.6 billion in cash and no debt. After a week of trading on Nasdaq, News Corp.’s widely traded shares have held their own — fetching about $15 a share.
“Newspapers are not as dead as people think,” said Mike Vorhaus, head of consulting firm Frank N. Magid Associates’ digital advisory unit.
Still, the health of a newspaper depends on the market it serves and some geographic areas, such as Chicago and Orlando, Fla., have more faithful readership bases and less competition than do other markets, such as Hartford, Conn., Vorhaus said. All three are Tribune newspaper markets.
Tribune’s decision to separate its newspapers from its faster growing TV and Internet properties accelerates a trend among media companies.
“This move illustrates a re-emphasis on TV as the primary focus of Tribune,” Vorhaus said.
Last week, Tribune announced a plan to acquire 19 TV stations — including in such markets as Denver, St. Louis and Kansas City, Mo. — in a $2.7-billion cash deal.
Local television is increasingly hot among investors, particularly after last year’s political election season which saw billions of dollars flowing to TV stations. In addition, the U.S. economy has improved in the last two years and people have been flocking to car dealerships, a major buyer of local TV station time.
In March, media giant Time Warner Inc. said it would spin off its Time Inc. magazines so that it could focus on its cable television and movie properties. Time Warner unveiled its breakup plan after its efforts to sell off some of its female-oriented magazines, including People and Entertainment Weekly, fell apart.
“A complete spinoff of Time Inc. provides strategic clarity for Time Warner Inc., enabling us to focus entirely on our television networks and film and TV production businesses,” Jeff Bewkes, chief executive of parent company Time Warner Inc., said at the time.
“Time Inc. will also benefit from the flexibility and focus of being a stand-alone public company and will now be able to attract a more natural stockholder base.”
Five years ago, the A.H. Belo Corp., with such newspapers as the Dallas Morning News, the Providence Journal and the Press-Enterprise in Riverside, became a stand-alone company — separating its TV and newspaper companies and listing them separately on the stock exchange. Shares of the newspaper company went public during the depths of the recession and thus drew a low valuation.
However, in the last year, shares of A.H. Belo have climbed dramatically, taking off around the same time that News Corp. announced its plan in late June 2012 to cleave itself into two parts. Eighteen months ago, A.H. Belo shares traded for under $4 a share. It is now trading at more than $7 a share.
Courtesy of the Lost Angeles Times