The Los Angeles Times and its owner, Tribune Co., moved a step closer this week toward ending a four-year bankruptcy, raising the prospect of a media battle for ownership of the country's fourth largest newspaper.
A judge this summer cleared the way for Tribune to exit bankruptcy as soon as the Federal Communications Commission granted the company waivers of its media ownership rules for broadcast. The FCC this week recommended the waivers, which means the company could emerge from bankruptcy by year's end.
Media experts predict the new controlling owners -- two private investment firms and a bank -- will put the Los Angeles Times, the Chicago Tribune and the company's six other newspapers on the block. The result: a high-stakes media poker game as an array of buyers maneuver to buy part or all of Tribune's publishing division.
"The new owners won't have any allegiance to any kind of legacy as an institution, family legacy or anything else," said John Morton, a Maryland newspaper consultant. Representatives of the Tribune Co. and the Times declined to comment.
The potential sale of such marquee properties has prompted public speculation and national news reports about potential buyers. Likely players include: Rupert Murdoch, chief executive of News Corp., which owns the Wall Street Journal and The Times in London; Douglas Manchester, who bought the U-T San Diego last year; Aaron Kushner, new owner and publisher of The Orange County Register, and various Los Angeles moguls who would like to restore local ownership of the Times after 12 years under Chicago control.
So far most would-be buyers remain coy, side-stepping questions about their interest. Only Kushner has said without reservation that he wants to buy Tribune's newspapers as part of an expansion plan for his investment group, 2100 Trust LLC.
Kushner and co-owner Eric Spitz, president of Freedom Communications Inc., the Register's parent company, entered the industry without any previous newspaper background. Kushner most recently headed a Boston greeting card company and Spitz was chief financial officer for Narragansett Brewing Co. They emerged last summer as the successful bidders for the Register, and have now set their sights on the Times and other newspapers.
"We do think of the Los Angeles Times as an incredibly important institution," Kushner said. "We would be honored to acquire the Los Angeles Times if they successfully are able to come out of bankruptcy."
He said the other Tribune newspapers play a similarly important role in their communities and are the kinds of media properties that interest his investment group. Kushner has hired Morgan Stanley as a financial adviser to help with his acquisition plans. The publisher, however, declined to say where funding would come from for a Tribune purchase.
One potential hurdle for the Freedom bid is possible anti-trust concerns by federal regulators, who review whether a company may unfairly dominate a market, particularly in advertising. Newspaper industry supporters, however, have contended that with the advent of the Internet and other media, anti-trust issues are less of a concern in the current landscape, but the matter has not been settled.
While some buyers may want individual Tribune properties, media industry experts say the Tribune Co.'s newspapers likely will be sold as a group -- at least initially.
"I think it's kind of the Wild West because these papers are so cheap, anyone could buy them," said Ken Doctor, a former newspaperman who is now an analyst at Bay Area media consulting firm Outsell.
Some see a Tribune newspaper deal as a fire sale. In a bankruptcy filing, Lazard Ltd. valued the eight Tribune papers at $623 million as of January -- down $300 million from a year earlier. Lazard cited declines in the publishing industry as a whole and at Tribune in particular for the dramatic drop in value. Just six years ago, billionaire entertainment executive David Geffen reportedly offered $2 billion in cash just for the Times. Geffen has said he is no longer interested in buying the paper.
As the Tribune Co.'s fortunes have declined, so have the Times'. In its heyday, the Times was the second largest paper in the nation with more than 1 million circulation and an editorial staff that topped 1,000. In 1968, the Times launched its Orange County edition in a head-to-head battle against the Register that escalated through the 1980s and 1990s.
In more recent years, as budget cuts forced the Times to retrench, the paper has been less of a force in Orange County. As of September, the Times had a combined print and digital circulation of 606,075 and a staff of about 500.
Despite its diminished size, the Times remains an influential Southern California institution and an attractive trophy for those who believe in the newspaper business.
Murdoch is one of newspapers' biggest fans. The Los Angeles Times reported last month that Murdoch was in preliminary discussions about purchasing the Times and Chicago Tribune, papers that would give him political influence for his conservative views in three major U.S. media markets. The story noted that during Southern California visits Murdoch would use a Sharpie pen to mark up Times pages and show how he would redesign the paper.
News Corp., however, issued a statement saying reports about talks with the Times and Tribune were "wholly inaccurate." Chase Carey, News Corp. president and chief operating officer, avoided answering a question about the company's interest during an earnings call earlier this month. The company this week reiterated the previous statement that the earlier reports were incorrect.
In addition to the Wall Street Journal and London Times, Murdoch owns a group of newspaper papers in his native Australia as well as HarperCollins publishing and Fox Television, which has 27 stations.
Tribune Co. also has a large broadcast operation that includes Chicago's WGN-TV, KTLA/5 in Los Angeles and 21 other television stations. While Tribune publishing has declined, Lazard separately valued the broadcast division at nearly $2.9 billion in January, up $350 million from a year earlier.
Other potential Tribune newspaper buyers could be waiting in the wings.
One may be Manchester, who bought the Union-Tribune in San Diego (now the U-T San Diego) last year. The hotelier and developer told KPBS last month that he was looking at the Tribune papers. John Lynch, the U-T's chief executive, subsequently said they were not interested in getting involved in an auction for the properties. That, however, could only mean they don't want to be caught in a bidding war.
"No comment," Lynch said to the Register's request this week for clarification. "The Tribune assets are not for sale and we do not speculate as to what might happen."
Manchester, however, remains in acquisition mode. He bought the 70,476-circulation North County Times in Escondido in September for just under $12 million.
For years, various prominent Los Angeles businessmen have talked with civic leaders in on-again, off-again efforts to acquire the Times and return it to local ownership. They include insurance and real estate mogul Eli Broad and, more recently, former investment banker and Los Angeles Deputy Mayor Austin Beutner.
Despite the widespread speculation about would-be buyers, it's possible that nothing will happen after Tribune exits bankruptcy, which is expected in the coming weeks. The Orange County Register's parent company, Freedom Communications Inc., emerged from bankruptcy in April 2010 and it was 18 months before the investors and banks that took over decided to break up the company.
Tribune reached an important bankruptcy milestone this week. The FCC recommendation on Wednesday to approve the waivers would free Tribune from rules that limit cross-ownership of newspapers and broadcast outlets in the same market. The FCC's approval would allow Tribune's broadcast licenses to be transferred to a new owner, one of the last steps in leaving bankruptcy.
Oaktree Capital Management, Angelo Gordon & Co. and JPMorgan Chase, Tribune's largest debt holders who will take control of the company after bankruptcy, have been mum on their plans. Although Tribune newspaper revenues have plunged, media experts said the investors who will take over could choose to hold onto the properties in hopes of turning them around to maximize their investment.
"All of this is up for grabs," said Morton, the newspaper consultant. "There are a number of ways to do it."
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