Tribune moves forward with newspaper unit spinoff

Tribune Co. is moving forward with the spinoff of its newspaper unit by submitting preliminary paperwork to the Securities and Exchange Commission.

The media company plans to distribute a 98.5% stake in the publishing unit to existing Tribune shareholders in a tax-free transaction, according to Monday’s filing. Tribune will hold the other 1.5%.

The newspaper unit, to be called Tribune Publishing Co., will apply to be listed on the New York Stock Exchange. The spinoff is expected to occur in the second quarter of 2014.

Tribune owns the Los Angeles Times and seven other daily newspapers.

The 166-page filing, known as a Form 10-12B, is the first step in the spinoff process. Such filings typically outline the prospects and challenges facing the new entity.

The Tribune filing contained broad financial and operating data about the newspaper unit, but it did not reveal some key information, including who will head the company and who will sit on its board of directors.

It also did not reveal how much cash Tribune will allocate to the spinoff as a financial cushion when it becomes a stand-alone entity.

Tribune disclosed in July that it planned to spin off its publishing unit into a separate company.

In cases like this one, spinoffs are Wall Street’s version of addition by subtraction. Because advertising revenue of Tribune’s publishing unit is declining steadily, splitting off the papers could make the rest of the company more appealing to investors.

It also would clear the way for Tribune to focus on its more valuable broadcast properties, such as KTLA-TV Channel 5 in Los Angeles and WGN in Chicago.

Monday’s filing demonstrated that the newspaper unit still relies heavily on print advertising, which has fallen sharply across the industry in recent years.

Last year, 61% of the newspaper division’s operating revenue came from advertising, according to the filing. The unit recorded net income of $61.4 million for the first nine months of this year. Revenue was $1.3 billion.

The newspaper unit will pay a cash dividend to Tribune before the spinoff, according to the filing. The payout will be funded through borrowing, the filing said.

Tribune has offset the weakness in print advertising with repeated cutbacks at its newspapers. The unit has eliminated 2,050 jobs since the end of 2009, according to the filing.

Tribune said last month that it will eliminate nearly 700 jobs over the next year. The cuts will come primarily from the publishing unit and will largely involve operations personnel rather than reporters and editors.

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