- BY MARK HARRINGTON |
- 8:13 PM EDT, May 2, 2008
News Corp. chairman Rupert Murdoch appears willing to test just how good a hand he has in the three-way poker match for Newsday, with a source Friday suggesting the media baron won’t budge from his $580-million bid in response to Cablevision Systems Corp.’s $650-million offer.
Without elaborating, the source familiar with News Corp.’s bid would only say yesterday that the company “would not be raising its bid.”
Another source familiar with the Murdoch talks cautioned against assuming he was bowing out of the auction for Newsday. “We’ve entered a different phase. He’s playing cat and mouse with the other bidders, making them think they’ve got Newsday, and then he will swoop in with the higher offer,” the source said.
But one apparent difference between the Cablevision and Murdoch bids may in part explain the Cablevision premium, and Murdoch’s confidence: Cablevision’s offer may include “the building you are in right now,” a source familiar with Cablevision’s bid said Friday, referring to Newsday’s Melville complex. Murdoch’s offer excludes real estate, sources said.
Word of the real estate element of the Cablevision bid first appeared in a Chicago Tribune column Friday that also said former Tribune Co. chief executive Dennis FitzSimons was serving as an adviser to Cablevision. FitzSimons did not return calls seeking comment. Spokespeople for Bethpage-based Cablevision, News Corp. and Tribune declined to comment.
Murdoch also may be posturing in the face of a bidding war that benefits Tribune chief executive Sam Zell. The company is straining under a mountain of debt tied to Zell’s 2007 plan to take the company private. Zell “would be most happy if Rupert outbid [Cablevision founder Charles] Dolan because then he would get what he desires on both counts: a lot of cash and Murdoch’s goodwill,” one source close to the negotiations said.
When Murdoch last year bid to buy Dow Jones, which owns The Wall Street Journal, he offered $5 billion in May — a price that stuck when the deal was finalized in August.
“I sense that Murdoch does not like to get into bidding situations,” said Edward Atorino, a media analyst for Benchmark Co., a Manhattan-based brokerage. “He likes to give you a price and you either take it or leave it and he moves on.”
Still uncertain is how Daily News owner Mort Zuckerman will respond. A spokesman for Zuckerman declined to comment.
“I think Zuckerman is coming back with a big offer and that Cablevision is prepared to go higher,” said Kevin Kamen, president of Kamen Group Services in Baldwin.
Cablevision’s $650-million offer wasn’t its first, sources close to the Zell-Murdoch talks said. Initially it offered $500 million for Newsday and then recently added $150 million to the bid, the sources said. It is unclear when the first bid was made.
Analysts who track Cablevision said it could buy Newsday for $650 million without significant financial stress. If Dolan become Newsday’s new owner, Cablevision would carry “about the same debt load as they went into the year,” said analyst Chris Marangi, of Gabelli & Co., which owns Cablevision shares. A February report by Gabelli investment house said Cablevision’s projected debt load would drop from $10.238 billion in 2007 to $9.566 billion in 2008, freeing up about $650 million in cash flow this year. That means its bid would match the amount of free cash flow this year.
Marangi said Cablevision might be more than capable of paying even more if there is a protracted competition with Murdoch and Zuckerman.
The Dolan family has “the capacity to pay a lot more” for Newsday, said Marangi. “It’s a trophy for them.” He also pointed out that Newsday’s estimated $70 million to $80 million profit for this year would also help defray the purchase cost.
Although Wall Street investors might not like the idea of buying a newspaper at a time when print values are depressed, media analyst and investor Porter Bibb said Dolan might be willing to add debt as well as part of a strategy to dissuade any possible hostile takeover bids in the future. Bibb said that adding Newsday print and online advertising to Cablevision’s existing cable, broadcast and online offerings would give it a much stronger presence in Long Island’s advertising market.
This story was reported by Mark Harrington, Ellen Yan, James T. Madore and Thomas Maier. It was written by Harrington.