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REUTERS, New York - Cablevision Systems Corp sealed a $650 million deal to buy 97 percent of Newsday Media Group from Tribune Co, the companies said on Monday, after Rupert Murdoch's News Corp withdrew its bid.
Cablevision said the deal returns the daily Newsday newspaper to Long Island, New York, ownership after 40 years, and saw opportunities for cross-marketing and advertising with its cable operations based in the same area.
But shareholders of Cablevision, run by the Dolan family, have questioned the wisdom of investing in the declining U.S. newspaper industry, saying they preferred the company use its cash to issue a rich dividend or buy back shares.
Cablevision shares fell 1.8 percent to $24.51 in premarket trading.
The agreement was expected after News Corp said on Saturday it withdrew its $580 million bid for Newsday because it could not justify outbidding Cablevision from an economic perspective. New York Daily News owner Mortimer Zuckerman had also bid $580 million for paper.
Tribune and Cablevision said they would set up a joint venture that would be majority-owned by Cablevision, with Tribune holding only 3 percent. Bank of America provided a firm commitment to provide $650 million of senior debt financing, they said.
The completion of this transaction is subject to regulatory approval.
The deal values Newsday at $632 million, with Tribune Co also receiving $18 million at closing as prepaid rent under certain leases of property used in the business.
That would be about seven times the paper's cash flow of $90 million in 2007, a figure mentioned by several sources familiar with Tribune's operations to Reuters in recent weeks.
Newsday Media includes Newsday, which reaches 1.5 million Long Island adults each week; amNewYork, a free daily in New York City; the Star Community Publishing Group of weekly shoppers; and Island Publications' portfolio of lifestyle magazines.
After the deal, Newsday could be marketed to hundreds of thousands of Long Island households served by Cablevision who do not currently subscribe to the paper, the companies said.
Cablevision could also promote its live sports and entertainment assets through Newsday's publications, particularly amNewYork, with its New York City circulation of more than 300,000.
Tribune will receive $612 million in cash, an equity stake in the partnership valued at $20 million and another $18 million in the prepaid rent.
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