Gannett a possible bidder for Tribune papers

November 12, 2006|By Michael Oneal and Phil Rosenthal | Michael Oneal and Phil Rosenthal,Chicago Tribune

Turning up the heat on the already simmering auction for the assets of Chicago-based Tribune Co., Gannett Co., the nation's largest newspaper publisher, has emerged as a possible bidder for Tribune's newspaper properties, the Chicago Tribune learned yesterday.

Executives from the McLean, Va.-based media giant, which publishes 90 U.S. newspapers, including top-read USA Today, were in Chicago last week to hear presentations on Tribune's financial condition, two sources close to the situation said.

Tribune has been hosting a number of bidders as part of a process it put in place in September to enhance shareholder value by possibly selling all of the company's television and newspaper assets.

But the emergence of a potential buyer with the resources and influence of Gannett could significantly change the complexion of the bidding process.

Spokespeople for Tribune and Gannett declined to comment yesterday for this article.

The sources noted that the Tribune sell-off is in its early stages, and that Gannett has participated in newspaper auctions before without pulling the trigger. Most recently, Gannett expressed formal interest in Knight Ridder Inc. before backing away.

But assuming it is serious, Gannett would be the first "strategic buyer" - Wall Street parlance for a suitor in the same industry - to jump into the fray.

Until now, bidding for Tribune assets had been thought to be limited to financial buyers: several large private equity firms and a handful of wealthy entrepreneurs. But, unhappy with bids that valued the whole company close to the current stock price of about $32 a share, Tribune began asking for bids on its parts - newspapers such as The Sun, the Los Angeles Times and the Chicago Tribune and television stations such as WGN-Channel 9, among other properties.

Sources said that opening up the bidding increased the level of interest among potential buyers in recent days. Last week, Los Angeles billionaires Eli Broad and Ron Burkle, who had earlier expressed interest in the Los Angeles Times, instead put in a bid for the entire company.

That might have induced others to move off the sidelines. At least one other media company, Denver-based MediaNews, is also interested in some of Tribune's newspapers, most notably the Hartford Courant, the Stamford Advocate and The Morning Call in Allentown, Pa., another source said. It's not clear, however, whether MediaNews has officially joined the bidding.

The emergence of a strategic buyer such as Gannett could mark a shift in the process by presenting Tribune Co. management with more flexibility in how to divvy up the company, said one Chicago attorney who has participated in many such deals.

Unlike a private equity player or a wealthy individual, a newspaper company like Gannett might see more immediate value in Tribune's newspapers, because it is a large operator of papers across the country and might be able to find operating efficiencies and uses that other buyers would not.

The auction for Knight Ridder this year provides a good example. Initially, several teams of private equity companies, as well as MediaNews and Gannett, bid for the company, only to back out by the end. That left Sacramento, Calif.-based newspaper operator McClatchy Co. as the only bidder. McClatchy bought all the Knight Ridder papers and then immediately sold off the lower-growth ones. Because many of the Knight Ridder papers matched McClatchy's strategy, going through this process made sense in a way it didn't for others.

What Gannett's strategy would be is unclear. But industry sources noted that Gannett owns several papers in Florida and would likely be most interested in owning Tribune Co.'s highly profitable papers in Orlando and Fort Lauderdale.

In any deal for Tribune papers, taxes are likely to be an issue, as Tribune has owned its properties for so long. But tax experts say there are many ways around that, including tax-free, spin-off structures.

Tribune and Gannett have a long history of working together. Gannett this year paid $180 million in cash for WATL-TV, Tribune's television station in Atlanta. Also, the companies are partners in several Internet-based businesses meant to replace the classified advertising disappearing from their newspaper pages: CareerBuilder.com, ShopLocal.com and Topix.net.

Michael Oneal and Phil Rosenthal write for the Chicago Tribune.

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