Cablevision outbids rivals to buy Newsday

NEW YORK - Cablevision Systems Corp. yesterday won a bidding war for Long Island newspaper Newsday in a $650 million deal.

The newspaper's sale by the Tribune Co. is an important step toward alleviating the company's massive debt burden - for this year.

Now the Chicago company needs to move on its next big asset sales, including the Chicago Cubs and Wrigley Field, to meet its obligations to creditors looming in 2009.

The Newsday deal puts one of Tribune's largest newspapers in the hands of a Long Island cable television operator.

Newsday is the country's 11th-largest newspaper, according to the latest figures from the Audit Bureau of Circulations, with 379,613 average paid weekday circulation in the six-month period that ended in March.

Investors have been skeptical about Cablevision's benefits from the deal because it hasn't operated a newspaper and the newspaper industry is struggling as readers and advertisers move to the Internet.

"It's incredibly hard to fathom why they want to expand into the newspaper business," said Richard Greenfield, a media analyst with Pali Capital. "Why are they putting dollars toward newspapers rather than buying their own stock?"

For Tribune, the motive is clear: The company needs cash. In December, Tribune bought out its public shareholders in an $8.2 billion deal orchestrated by real estate mogul Sam Zell, and now it's struggling to service that debt.

Tribune last week reported an 11 percent decline in first-quarter newspaper revenues, which have been hit hard by the slumping economy and online competition.

Tribune seems to be covered on a $650 million lump-sum debt payment due in December as well as other near-term obligations. But analysts said it needs to get moving on other asset sales to be in shape to deliver on a $750 million debt payment due in June 2009.

The next step for Tribune is selling the Cubs and Wrigley Field. Together, the two could fetch as much as $1 billion, which would get the company past the 2009 payment.

Another option for Tribune would be selling its roughly 30 percent stake in Food Network back to E.W. Scripps Co., which owns the rest of the rapidly growing cable TV channel. Analysts estimate that stake could be worth more than $500 million.

To get favorable tax treatment, Tribune will retain a 3 percent stake in a joint venture to be formed containing Newsday as well as several related assets. Cablevision will hold the remaining 97 percent.

The deal will be financed by a $650 million loan from Bank of America Corp.

Cablevision, which is controlled by the Dolan family, has about 3.1 million subscribers in the New York metro area and owns Madison Square Garden, the New York Knicks and the New York Rangers.