Read All About It! Tribune Set To Spin Off Its Publishing Business

The publishing business is changing and with a new world often comes new owners with fresh ideas. Amazon’s (AMZN) Jeff Bezos recently purchased The Washington Post and hedge fund titan John Henry snatched up the iconic Boston Globe. Even public companies like News Corp (NWSA) and Time Warner (TWX) are in the process or completed unloading their publishing assets into independent companies as digital media has become the sexier business.

In a world of followers, it is no surprise that the Tribune Company (TRBAA) has announced that it too will separate its publishing company from its media business.

The tax free spinoff is expected to create the following two companies:

  1. Tribune Publishing Company, which would become home to Tribune’s publishing assets, including the Los Angeles Times, Chicago Tribune, The Baltimore Sun, Sun Sentinel (South Florida), Orlando Sentinel, Hartford Courant, The Morning Call and Daily Press.
  2. Tribune Company, which would consist of the company’s other principal businesses, 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.

The move will represent a new chapter in Tribune’s troubled history. The company was taken private by Sam Zell in 2007, but the massive amount of debt incurred as part of the transaction coupled with a decline in the newspaper business led the company to Chapter 11 land in 2008. The process took quite some time and the company only emerged from bankruptcy in December of 2012, under the control of its senior creditors Oaktree, Angelo Gordon and JP Morgan (JPM). Shortly thereafter the company signaled its desire to focus on its media business by paying $2.75b for 19 stations from Local TV. As further proof to the change in strategic thinking, the company hired advisers to pursue its options for its newspaper business. Rumors were flying that it was for sale and there had been talk of the Koch brothers being interested in the business, but they recently announced that they were no longer in pursuit.

Obviously, no buyers emerged so the company decided to go with the spinoff route. Hard to believe no one was interested, although the publishing business doesn’t have a ‘superstation’ amongst its assets. How does one channel earn such a moniker anyways? Play enough Becker reruns?

Ultimately, this looks like a classic separation of perceived ‘bad’ assets from ‘good’ assets, but perhaps the transaction and increased management focus will help turn things around. At the very least, it can’t be worse than Tribune’s prior ownership of the Chicago Cubs. The World Series challenged team was majority owned by Tribune for close to 30 years, but their reign only witnessed more heartbreaking incidents such as Bartman.

A plan for the spin is expected to be presented to Tribune’s board in the next 9-12 months, so this will take awhile. In the meantime, there is always the possibility a new buyer will emerge.

Disclosure: Author is long shares of TWX

2 thoughts on “Read All About It! Tribune Set To Spin Off Its Publishing Business

  1. Anon2

    There wasn’t a sale not because there weren’t any buyers, but because they didn’t want to take a 40% tax hit on a sale (cost basis is basically zero due to the Zell ESOP deal). A spin obviates this tax obligation.

  2. TheSpinDoctor

    Good point on the taxes and the benefits of a spin. Likely a consideration here, especially as Tribune still has some other outstanding tax issues to deal with. You never know what will happen in these situations though

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