Tribune to split broadcasting and publishing into two companies

Tribune Co, the 166 year-old multimedia giant, today said that it would split its iconic broadcasting and publishing businesses into two separate companies each having revenues in excess of $1 billion and significant operating cash flow.

The move comes just six months after the Chicago-based company emerged from bankruptcy protection and a few days after it agreed to buy 19 local television stations from Local TV Holdings from Oak Hill Capital Partners in a $2.73 billion cash transaction. (See: Tribune Co to buy 19 local television stations from Local TV Holdings for $2.73 bn)

Tribune said that the proposed separation is designed to maximise shareholder value through the spin-off of Tribune's publishing assets to an independent company and the tax-free distribution of shares in that company to the stockholders of Tribune.

Tribune's publishing assets, including the Los Angeles Times, Chicago Tribune, The Baltimore Sun, Sun Sentinel , Orlando Sentinel, Hartford Courant, The Morning Call and Daily Press would be transferred into a new entity, to be called Tribune Publishing Company.

The Tribune Co would consist of its broadcasting business, including 42 local television stations in 33 markets (following the close of Tribune's acquisition of Local TV), WGN Radio, superstation WGN America, Tribune Studios, Tribune Digital Ventures, Tribune Media Services, its equity interests in Classified Ventures, CareerBuilder, and The TV Food Network, and its valuable portfolio of real estate assets.

Tribune said that the separation of operations will allow ''each with greater financial and operational focus, the ability to tailor its capital structure to its specific business needs, and a management team dedicated to seizing strategic growth opportunities with maximum flexibility.

Over the last several months, Tribune's board had evaluated several strategic options looking at long-term growth.

''Moving to separate our publishing and broadcasting assets into two distinct companies will bring single-minded attention to the journalistic standards, advertising partnerships and digital prospects of our iconic newspapers, while also enabling us to take advantage of the operational and strategic opportunities created by the significant scale we are building in broadcasting,'' said Peter Liguori, Tribune's president and CEO.

During the next nine to 12 months, Tribune plans to develop detailed separation plans for the company's board of directors to consider.

Until last month, Tribune was considering offers for its publishing assets, but the process has moved at a snail's pace, much to the discomfort of the board.

In February, Tribune had hired investment banks JPMorgan Chase and Evercore Partners to oversee offers for Tribune's publishing assets, which were valued at around $620 million in its bankruptcy filing, but nowhere near the $2 billion cash offer made for the Los Angeles Times alone by entertainment mogul David Geffen in 2006. (See: Tribune Co hires investment bankers to explore sale of newspapers)

After emerging from bankruptcy, analysts had speculated that Tribune would try to sell its newspaper business and focus on its more lucrative television business.

Some prominent suitors had been named by the media as possible buyers. Media baron Rupert Murdoch's News Corp, Austin Beutner, a former venture capitalist and ex-deputy mayor of Los Angeles, investor Aaron Kushner, who bought the Orange County Register and six small papers last year for around $400 million, Dough Manchester, the San Diego real estate developer who last year bought the local Union Tribune newspaper for around $110 million, and Warren Buffett, who has been adding small town newspapers to his growing portfolio.

Tribune could still opt to sell its publishing business if it does get good offers, say analysts.

The newspaper industry in the US has for long been on the decline due to advertisers shifting preferences to online advertising. Advertising revenues across the newspaper industry have fallen from $49.4 billion in 2005 to $23.9 billion in 2011, according to the Newspaper Association of America.