How will Globe, Post sales affect Tribune?

By Lynne Marek  August 06,  2013

Today’s Headlines 8/6/2013

Copyright © 2013 Crain Communications, Inc.

Chicago Crain’s Business

For Tribune Co., the recently announced sales of the Washington Post Co. newspapers and the Boston Globe group make clear there’s still a market for major newspapers. But analysts say they’ll be worth more sold separately and sometime soon.

There were multiple bidders for each paper, according to published reports, a piece of good news in a depressed market for newspaper properties. The Tribune Co. newspapers, which include the Chicago Tribune, Los Angeles Times and Baltimore Sun, could fetch between $725 million and $1 billion, reaching the higher end if they’re sold piecemeal, according to some industry analysts.

“Someone might offer $750 million,” said Kevin Kamen, who leads Uniondale, N.Y.-based media broker Kamen & Co. Group Services. “It’s not worth more than that — it’s probably not even worth that amount.”

Mr. Kamen estimates the value of the Chicago Tribune at $265 million and the Los Angeles Times at $375 million, if they’re sold individually. While local buyers may not be willing to bid for the whole group, they’ll pay more to consolidate their hold on the market, he said. The bidding process would probably take the total value of Tribune’s papers to the low $700 millions, he said.

New York Times Co. sold Boston Group’s newspapers last week for $70 million and the Washington Post Co. announced yesterday that it was selling its flagship paper and some suburban publishing assets for $250 million.

“You get more money if you piecemeal it out,” Mr. Kamen said. “Publications are worth more to people who are already in that market” because they can cross-sell with their existing businesses and cut duplicative costs, he said.

Chicago Sun-Times owner Wrapports LLC, led by Michael Ferro, earlier had expressed an interest in buying the Chicago Tribune while others, including billionaire executive Eli Broad, said they would bid for the Los Angeles Times.

BWS Financial Inc. analyst Hamed Khorsand, who has been following Tribune since it emerged from bankruptcy last year and its shares began trading publicly, said that he estimates the value of Tribune’s newspapers could reach closer to $1 billion based on the price per subscriber achieved in the Washington Post transaction.

Tribune’s publishing unit was valued at $623 million by its bankruptcy consultant Lazard LLC last year. Analysts agree the value of newspapers is declining as circulation continues to drop and advertisers seek other channels.

Tribune began seeking to sell the newspapers earlier this year but last month put that effort on hold and announced that it first would separate its publishing and broadcast units. The company said the spin-off could take as long as a year to execute, though the Chicago-based company could presumably continue to entertain interest from bidders.

The company’s new owners, who are creditors that took control of the company in January following its exit from four years of bankruptcy, are focusing on its broadcast assets in the face of the continuing decline in subscribers, advertisers and revenue at newspapers across the industry. Most newspapers, including the Tribune properties, are seeking to stem a decline in income by bulking up online and mobile operations, but so far that new income hasn’t offset losses.

Tribune stock has declined slightly, about 2 percent, since the Boston Globe deal was announced on Aug. 4, slipping to $62.80 in late afternoon trading today. The shares are still trading higher, though, than they were the day before the company announced it would spin off the publishing unit.