Tribune Co. announced plans to spin off the L.A. Times and its other newspapers into a separate company, reports the L.A. Times’ Walter Hamilton. The news comes a little over a week after it was announced that Tribune would buy 19 television stations from Local TV holdings.
Details On Tribune’s Spinoff
The media company said spinning off its newspapers into a separate company would enable it to focus on its Internet and television units. The new company will be Tribune Publishing Co., and in addition to the L.A. Times, it will include the Chicago Tribune and six other newspapers. All of the company’s other assets, including its real estate and Internet site stakes, will continue to be part of Tribune Co.
It’s expected that the separation will take up to a year and that it will be tax-free to shareholders of Tribune.
Other Publishing Spinoffs
Tribune Co. isn’t the first media giant to spin off its troubled publishing division. News Corp. (NASDAQ:NWSA) completed the spinoff of its publishing division just a short time ago. The purpose behind such spinoff is to separate the newspapers, which have been struggling financially amidst declining revenue, from the television assets, which are far more profitable.
Tribune’s CEO told employees that both of the two companies would be stronger after the separation. Before this spinoff was announced, Tribune Co. had been trying to sell off its newspapers privately. Earlier this year, the media company worked with investment bankers to explore options.
Sources told the L.A. times that a number of parties had expressed interest in Tribune’s newspapers. However, the private selloff process has moved very slowly, and interested buyers have reportedly not yet seen the financial books of the newspapers. There is still a chance that the spinoff won’t happen and that the newspapers could be sold instead.
According to the L.A. Times, the publishing division of Tribune Co. made up 64 percent of its operating revenue last year. The company’s newspapers are still profitable, but advertising has been declining rapidly, falling 9 percent in the first quarter of the year alone after falling just 14.5 percent between 2010 and 2012. Over the last three years, Tribune has eliminated more than 2,000 positions.
There are still many other details that haven’t been worked off regarding the spinoff, like how much debt the new publishing company will carry and how much capital it will receive to help bolster itself during the transition.