Tribune completes spinoff of newspapers including The Baltimore Sun

Tribune Co. completed the spinoff Monday of Tribune Publishing Co., which includes The Baltimore Sun and nine other daily newspapers.

Tribune is just the latest multimedia news company to split up its broadcasting and publishing assets, joining Rupert Murdoch's News Corp. and E.W. Scripps, which completed such a spinoff just last week. Such separation is gaining momentum as traditional media seek to adapt to the fast-evolving digital landscape.


An amicable corporate divorce is generally seen as best for both sides, streamlining them to compete against new media behemoths such as Google.

Tribune Media and Tribune Publishing, which share a family history dating back 90 years, are no exception, according to Carl Salas, a vice president and media analyst for Moody's Investors Service.


"It's a win for both companies," Salas said. "It helps publishing free itself and invest in itself.

"And for the main company, it's seen as a higher-growth business and it attracts investors who were turned off because they didn't want the publishing side, because they thought that was a drag."

First announced in July 2013, the spinoff of the newspapers, which also include the Chicago Tribune and Los Angeles Times, allowed Chicago-based Tribune Co. to offload its publishing assets while avoiding the large capital gains taxes associated with an outright sale.

The parent company, now known as Tribune Media, is retaining its higher-growth broadcasting and entertainment assets, as well as real estate holdings and equity investments.

Tribune Publishing units, including The Baltimore Sun Media Group, now lease their real estate from Tribune Media. The Baltimore media group, which also publishes a number of community papers in the region, recently acquired The Capital in Annapolis and The Carroll County Times, both daily newspapers, and the alternative weekly City Paper.

As part of the deal, Tribune Publishing paid Tribune Media a $275 million cash dividend Monday, funded by the proceeds of a $350 million senior term loan.

Tribune Publishing issued about 25 million shares of common stock under the symbol TPUB, distributed tax-free Monday to Tribune Co. stakeholders. The stock is expected to start regular trading on the New York Stock Exchange on Tuesday.

Tribune Publishing starts with about $50 million in cash, another $140 million in credit and a projected levered free cash flow of $63 million in 2014, according to CRT Capital Group analyst Lance Vitanza.


In recent years, Tribune's publishing business has remained profitable in the face of declining newspaper industry revenues, in large part through cost-cutting. Tribune Publishing CEO Jack Griffin is looking to grow revenues through digital initiatives, diversified revenue streams and strategic acquisitions.

Since emerging from bankruptcy in late 2012 under CEO Peter Liguori, Tribune Co. has focused on building its broadcasting assets, including last December's $2.73 billion acquisition of the 19-station Local TV group and the investment in original programming to build national cable channel WGN America.

While Tribune Publishing loses whatever synergy may have existed with the assets, it is now the only beneficiary of its cash flow going forward, enabling it to invest in its own future, according to Salas.

News Corp. spun off its newspaper holdings, including The Wall Street Journal, in June 2013 and fortified them with $2.6 billion in cash and no debt, separating it from the broadcast and entertainment business, which was renamed 21st Century Fox.

"On its own, News Corp. publishing can invest in itself, develop its own strategies and do very, very well," Salas said. "21st Century Fox has done well because it has shed the publishing business and was able to focus on the higher-growth media. It's a win for both sides."

Tribune Publishing has shown that strategic acquisitions, such as the May purchase of the Annapolis and Carroll County papers to expand the reach of Baltimore Sun Media Group properties, may be part of the plan.


"As a separate entity, they will do that because it helps the shareholders, it helps the company, it helps everyone," Salas said. "They're not competing for the capital with the television assets."

While the financials vary, the urge to diverge has swept across traditional media companies in recent years, as they move toward focusing on core brands.

The Washington Post newspaper was sold to founder and CEO Jeff Bezos last fall for $250 million. The parent Washington Post Co. changed its name to Graham Holdings Co. and held onto its five television stations.

Also last fall, The New York Times sold The Boston Globe to Red Sox owner John Henry for $70 million, to focus on the digital development of its core product.

Last Wednesday, The E.W. Scripps Co. and Journal Communications, publisher of the Milwaukee Journal Sentinel, agreed to merge their broadcast properties and spin off their publishing assets.

Salas said the Tribune Co.'s investment in television and divestment of publishing was a blueprint of sorts for the Scripps-Journal deal, but in "one fell swoop."


"What E.W. Scripps and Journal are doing is exactly what Tribune Co. has done and laid the groundwork for," Salas said. "It shows that a lot of investors, a lot of board rooms were saying this is the right strategy."

Separately on Monday, Tribune Media agreed to sell its stake in, after Gannett Co. offered to buy out its partners in the auto sales website for $1.8 billion. Tribune Media owns just under 28 percent of through Chicago-based Classified Ventures, partnered with A.H. Belo Corp., Gannett Co. Inc., The McClatchy Co. and Graham Holdings Co.

The Gannett purchase values at about $2.5 billion, which means Tribune Media will get as much as $700 million from the sale.

In March, Classified Ventures sold to commercial real estate research firm CoStar Group Inc. for $585 million, netting Tribune Co. $160 million.