Cable suitor to grab Newsday

$650 million offer sidelines Murdoch

By Phil Rosenthal | Tribune reporter

1:37 AM EDT, May 11, 2008

Tribune Co. is closing in on a deal to sell control of its Long Island, N.Y., newspaper Newsday to Cablevision Systems Corp. for $650 million, sources with knowledge of the negotiations said Saturday, with one noting an announcement could come "within 48 hours."

The transaction would include some real estate, but Tribune Co. would retain ownership of the paper's headquarters in Melville, N.Y., and its printing plant. Tribune Co., which owns the Chicago Tribune, also would keep a stake in Newsday of less than 5 percent as part of a deal structure that minimizes its exposure to taxable capital gains, sources said.

Earlier Saturday, representatives for Rupert Murdoch's News Corp. confirmed the company was withdrawing its $580 million bid for Newsday, despite Murdoch's expressed confidence just three days earlier that he would land Newsday, even in view of Cablevision's higher bid.

Murdoch on Wednesday had said gaining control of Newsday would result in $100 million in improved cash flow through operating efficiencies with News Corp.'s New York Post. Sources on Saturday said a deal still could be struck with News Corp. to create cost-saving partnerships between Newsday and the Post in areas such as printing and distribution, but that was not likely to happen until after a Tribune Co.-Cablevision transaction was announced, if at all.

News Corp. had an informal agreement for Newsday before Cablevision upped its offer from $500 million and was unwilling to increase its bid, especially in light of Tribune Co.'s latest newspaper earnings, a source close to News Corp. said. First-quarter results announced Thursday showed an 11 percent drop in revenue, to $823 million, in Tribune Co.'s publishing division, which includes the Chicago Tribune.

Spokesmen for Tribune Co. and Long Island-based Cablevision declined comment. New York Daily News Publisher Mort Zuckerman, who also submitted a bid of at least $580 million, could not be immediately reached.

Zuckerman's bid, like that of News Corp., could face regulatory hurdles that Cablevision, a cable television, communications, sports and entertainment conglomerate without a newspaper in its portfolio, would not.

Additionally, adding Newsday to News Corp.'s New York-area holdings that already include the Wall Street Journal and two television stations would require an exemption from Federal Communications Commission cross-ownership rules, though Murdoch said Wednesday that he was "very confident" of gaining approval "even if we have to go to court."

"We think everything's in hand," Murdoch said of a Newsday deal during News Corp.'s quarterly conference call with analysts, predicting that a deal would be completed "within the next week, and I don't mean the end of next week, I mean in the next seven days."

But Murdoch also cautioned that News Corp. was "certainly not in the business of getting into an auction here."

Tribune Co. went private last year in a heavily leveraged $8.2 billion deal engineered by billionaire Sam Zell.

philrosenthal@tribune.com