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The Orlando Sentinel, a Florida-based newspaper and asset of the Tribune Co, is an attractive and potentially likely divestiture after Tribune’s take-private deal closes, sources familiar with the company told mergermarket. The first of the sources, who is a former advisor to Tribune and who continues to hold shares in it, as well as an industry analyst, speculated the newspaper may sell for more than USD 100m.
This news comes as Federal Communications Commission chairman Kevin Martin has proposed exempting Tribune from rules prohibiting the ownership of newspaper and television stations in the same market for the next two years.
Orlando’s sizeable visiting resort readership, combined with Florida’s growing demographics, makes the Sentinel a popular candidate for divestiture for the Illinois-based Tribune, according to the three sources familiar with the company. The NYSE-listed Tribune declined comment on a possible divestiture of the Sentinel.
The second and third sources familiar with Tribune, which will have approximately USD 13bn in debt after its planned USD 8.2bn take-private deal, said the Illinois-based company could see the newspaper as non-core, as it is outside its largest markets and is located where it is not clustered with a broadcast outlet. Further, those sources noted, if proposed new FCC rules are adopted that allow cross-ownership in the top 20 US markets, the Orlando area, while the third most populous in Florida, is 27th overall in the US and thus would not permit a newspaper/broadcast cluster as Tribune often prefers and currently holds in other markets.
The sources said that anti-trust concerns, along with the effect of the newly proposed FCC rules, increase the chances that a local, private group buyer, rather than a larger strategic, would buy the newspaper. Purchase interest locally in the 131-year-old newspaper, the sources said, would be expected to be intense. The former advisor said advertising and classifieds revenues have slid as of late for the Orlando paper, and its circulation has declined, but it remains a prominent Florida paper in an area that continues to grow. However, that source added, the ongoing credit crunch’s effect on the mortgage market could potentially slow the influx of population growth and thus, readers into the Orlando area.
The newspaper, which in 2005 had daily circulation figures of about 251,000, slid 10% and in 2007 reported weekday circulation of 213,406, according to industry figures. The newspaper’s Sunday circulation is 318,394, according to industry figures. The newspaper remains attractive, particularly to local buyers, said the second and third source familiar with Tribune, noting that the newspaper recently became the third-largest weekday circulation newspaper in Florida, and the second-largest on Sunday, amid smaller weekday declines compared to other newspapers in that state and a small uptick on Sunday. The most recent circulation numbers, which covered the six months ended 30 September, were the Sentinel’s best circulation performance in several years, the sources noted
The Sentinel, according to the analyst, could sell in as little as within a year of the deal’s completion, because of its potential value combined with the fact that it is not one of the Tribune’s most valued papers.
When asked, the second source familiar with the situation agreed with the analyst’s time frame, but the third source familiar said that the time frame could be somewhat longer if Tribune “can handle its debt,” adding, “that would allow a sale when market conditions were best.”
Tribune plans to close its take-private deal, under which Tribune employees have ownership but Sam Zell has control, by year’s end. The deal must close by 15 May 2008 or the company will risk termination of the deal, according to regulatory filings.
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