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After bid by Cablevision, rivals mull offers for Newsday

BY JAMES T. MADORE AND THOMAS MAIER | james.madore@newsday.com; thomas.maier@newsday.com

9:42 PM EDT, May 1, 2008

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Cablevision Systems Corp.'s $650-million bid for Newsday has been received, and rival suitors were said to be mulling possible changes to their offers, sources familiar with the talks said Thursday.

Newsday's parent, Tribune Co., was expected to give News Corp. chairman Rupert Murdoch and Daily News owner Mortimer Zuckerman an opportunity to revisit their respective bids, both of $580 million, or $70 million less than that of Cablevision, according to sources familiar with the talks between Tribune and News Corp.

They also said the three offers include a joint venture whereby Tribune retains a small stake in Newsday to lessen its capital gains tax.

"Tribune is focused on the price and the structure of any arrangement," one of the sources said. Tribune chief executive Sam Zell "still would like to do a deal with Murdoch because they have a budding relationship, but Rupert is going to have to put more money in -- which I think he will do."

Another source familiar with the Zell-Murdoch talks said lawyers were reviewing the bids and exploring how the various joint ventures would be structured. "Zell doesn't want the grass to grow on this thing -- but he also is glad to see a bidding war develop for Newsday," the source said.

Tribune is seeking a buyer for Newsday and its subsidiaries, including the commuter paper amNewYork, to raise cash for debt payments stemming from the media giant's going private last year. Cablevision's bid would just about cover a payment due Dec. 4.

Spokesmen for Cablevision and Tribune declined to comment Thursday. A News Corp. official wasn't immediately available. However, a source familiar with the Daily News' bid said: "This is an ongoing process. We're not surprised by this, and we're going to review our options."

But some details emerged about the role played by former Nasdaq chief Frank Zarb in the Cablevision bid or why another potential suitor for Newsday, The New York Observer, decided against pursuing a bid with the Bethpage-based cable giant, according to a source familiar with the Cablevision-Observer talks.

Observer executives were in contact in the past few weeks with Zarb, former federal energy czar and active Long Island business figure, who was looking to help put together a joint venture that would involve Cablevision, according to the source. Zarb had been mentioned earlier as a possible leader of a consortium to purchase Newsday when Tribune was up for sale last year.

Observer owner Jared Kushner was introduced to Cablevision founder Charles Dolan by Zarb, according to the source, who said Zarb was looking to play the role of marriage broker and possibly be a small investor in a joint venture.

Observer officials met with Dolan and agreed to pursue a possible joint venture, the source said. But at a second discussion on Wednesday, the Observer backed out as Dolan indicated he was willing to press a $650-million bid, possibly with another partner if needed, the source added.

The Observer decided to bow out, saying the escalating price for Newsday was "too rich for our system," said the source.

It could not be determined whether Zarb is continuing to play a role in the Newsday bidding. He did not return calls for comment.

Staff writers Ellen Yan and Mark Harrington contributed to this story.