Zellow Journalism: Tribune Co. Sells Newsday to News Corp.

According to LA Times report "Tribune agrees to sell Newsday to Murdoch company, source says" Sam Zell who has shown a particular fondness for Rupert Murdoch is moving even closer to the news media magnate.

Earlier it was reported that Zell had hired a major player at Fox News to run the television stations he had aquired when buying the Tribune empire.

Now Zell, who promised to never sell any of the company's core business (ie. newspapers) will be selling most of the New York paper to Murdoch's mega holding company.  Neveryoumind that Murdoch already owns a New York paper and one called the Wall Street Journal that could be considered a New York paper, and has vowed to crush his competition (at least in the form of the New York Times) in the city. 

*RE  NewsMax capture of Rupert Murdoch quote in "Murdoch: Nice to Kill NY Times".  Newsmax is a right wing "newsite" propaganda machine which wants you to give them your email address when you vote in their 'polls' so they can collect more money from Republicans by spamming your box.  But I'd heard the allegation that Murdoch has designs on the Times either buying or replacing it, but at this time, this was the only quote I could find on the web.

Excerpt from News Max article linked above (dated 10/18/07):

Speaking at a conference in San Francisco on Wednesday night, the News Corp. chief said: “We have a lot of plans and a lot of ideas that need to be refined. But I want to improve it in every way – in what it does now in finance to start with, but I also want to add more national and international news…

“I want to add major coverage of the arts, fashion and culture.”

When asked if he was aiming to kill the New York Times, he replied: “That would be nice.”

The Times article notes that Zell will retain less than 5% of Newsday and run the paper as a joint venture.  Yes, that's right elbow to elbow, though he promised when he made the deal to keep the Tribune Co. impartial.

Another promise Zell made when he usurped a Broad-Burkle deal (which offered as much money as Zell and earlier) was to refrain from balancing the books by cutting staff.  Since his takeover some local stations have hosted an assortment of LA Times employees complaining of Zell's slash and burn at the newspaper.

Excerpt excellent Reuters analysis: Tribune Co faces default threat in '09:

- Tribune Co is at risk of defaulting on its debt in as little as 18 months if the newspaper business deteriorates further, and it fails to unload more properties.

By some estimates, Tribune could fetch $1.6 billion for the Newsday daily paper and the Chicago Cubs baseball team and related properties, the assets it has already put on the block.

...

Still, Tribune has nearly $4 billion in debt and interest payments due by the end of 2009, according to Gimme Credit analyst Dave Novosel, making it all but certain that the company will be forced to sell more marquee properties and make deeper cost cuts to avoid violating debt covenants.

"Tribune is a big microcosm of issues across the industry, and Sam Zell made an unfortunate bet, if you will, jumping into a business he knew nothing about," said veteran newspaper analyst Miles Groves.

...

could be covered by anticipated free cash flow, unless the newspaper industry sinks further amid the weak U.S. economy and the recession in advertising spending. 

So far, the outlook is grim. Goldman Sachs analyst Peter Appert said he expected first quarter newspaper ad revenue to decline by 10 percent. "Managements will find it nearly impossible to fully offset this level of revenue decline with cost cutting," he said.

The declines in the industry and the company, unforeseen by the deal's architects last year, have narrowed what analysts have said is Zell's already slim margin of error.

This might be good news, but Zell's penchant for deals with Murdoch doesn't encourage hope the whole kit and kaboodle won't end up in Murdoch's  pocket.

BTW, Zell could have backed out at anytime up until late December.  By then signs of recession were quite clear.  

Eli Broad (a Los Angeles area builder) and Ron Burkle signaled their interest in buying the Los Angeles Times last year after Zell closed the deal while agreeing that such a sell might be feasible.  As soon as the sell was agreed upon he immediately reneged on the Broad-Burkle offers, though promising to sell the Times over to local owners may have given him the edge. 

Weirdly, the Newsday sell might not do a lot for the Tribune's bottom line in the long run.  From the Times report linked at top:

The structure of the deal is in part designed to meet Tribune's demand that it be as tax efficient as possible, with Tribune getting cash from the deal by guaranteeing debt from the joint venture, the Journal reported.

This guy is beginning to sound like a debt junkie.

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