Tribune Co. looks to strip out costs as it prepares for spinoff of newspapers, possible sale
A report by Robert Feder, and later confirmed by an L.A. Times story, reveals that the Tribune Company is looking to strip out $100 million in costs in order to improved its bottom line look before the spinning out its publishing division – or any possible sale.
“Everything is on the table. We’re looking at how to put our publishing businesses on the best possible footing for the long term,” Tribune spokesman Gary Weitman said.
The tactic may work as today’s media investors are not the sharpest knives in the drawer, as the cliché states. A simple request to get two or three years of back P&Ls would clearly show what was done to the business. But sadly I’ve personally known media executives who routinely completed media acquisitions without a thorough due diligence, going so far as to forbid their CFOs from examining the books or creating new P&Ls before a deal is finalized (with the expected results, I might add).
“They need to show that the publishing unit is going to be solvent to run on its own when they spin it off,” Robert Feder quoted an anonymous source.
According to the L.A. Times, the Tribune Company has eliminated 2,200 jobs over the past three years. Revenue has been falling precipitously, down 10.5 percent in the last quarter. But the company is still very profitable, thanks to its broadcast segment, though income fell 39.7 percent in the last earnings report. Because of this, any spinoff of publishing would have to be a temporary measure as that side of the business would not be able to survive long on its own. Most M&A people believe the logical move would be to sell off the individual properties at some point to new owners who want the newspapers for the influence they can wield locally.