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Paper tiger

10 Jul 2013 By Jeffrey Goldfarb

It isn’t often that the tarnished Rupert Murdoch finds himself looking anything like a white knight. Tribune Co’s plan to spin off its newspapers seems, though, to put the media mogul squarely in that role.

After emerging from bankruptcy in January, Tribune refocused on its more profitable broadcasting operations instead of publishing. Hence last week’s $2.7 billion deal to buy a collection of TV stations. Efforts to sell Tribune’s eight newspapers attracted interest, including from David and Charles Koch, the billionaire brothers who run one of the country’s biggest private companies and back conservative causes and candidates like 2012 Republican presidential contender Mitt Romney.

The possibility of the Kochs running the Los Angeles Times and the Chicago Tribune may well have brought political pressure on Tribune’s owners, the largest of which is Oaktree Capital, the Los Angeles-based private equity firm run by Howard Marks. Many of the city’s power brokers, including Hollywood players like Jeffrey Katzenberg, are big Barack Obama supporters. In Chicago, meanwhile, the president’s former chief of staff, Rahm Emanuel, is the mayor.

Tribune, now led by former Murdoch lieutenant Peter Liguori, says spinning off its publishing assets will create the most value for its shareholders. But the tax-free transaction it has in mind does not necessarily meet the stated goal of maximizing flexibility. For one thing, the approach can prevent a sale of the company, for instance to the Kochs, for two years. And it’s possible the newspaper assets will be valued at less than their tax basis, rendering the tax-free process and constraints unnecessary.

For Murdoch, however, the extra time might come in handy. Though he’s a natural buyer, splashing out on Tribune’s publishing assets so soon after spinning off his own newspapers, including the Wall Street Journal and other titles, might not sit well with investors. U.S. rules governing the ownership of a TV station and a newspaper in the same geographic market for now are also problematic. And Murdoch is under scrutiny again from British politicians over the costly phone-hacking scandal involving his UK tabloids.

If the veteran News Corp and Twenty-First Century Fox boss does eventually wind up with Tribune’s newspapers, he’d get something of a last laugh. The man whose outlets are denounced by liberal critics as right-wing mouthpieces will have managed it partly because the same politics kept the even more conservative Kochs at bay, and played into Murdoch’s hands.


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