$85M deal to combine U-T, LA Times

Purchase agreement signed today by Tribune Publishing; papers to remain separate brands

By Dan McSwain 4:01 P.M.MAY 7, 2015

The U-T headquarters in Mission Valley. — K.C. Alfred

The owner of the Los Angeles Times has agreed to buy U-T San Diego, combining two of Southern California's oldest and most recognizable media companies, executives announced Thursday.

Tribune Publishing, which owns nine other daily newspapers including the Chicago Tribune and Baltimore Sun, said it will pay $85 million for the U-T operation, a sum that doesn't include its Mission Valley headquarters.


Austin Beutner

With potential to reduce costs and combine resources, the deal is designed to help the two media operations compete for readers and advertisers against an onslaught of firms, ranging from Facebook to Politico to Yelp, that focus exclusively on reaching people through the Internet and mobile devices.

Austin Beutner, the Times publisher and chief executive, will hold those posts at both companies after the deal closes in coming weeks. Employing about 500 journalists in the Times newsroom and 175 at the U-T, the combined companies would offer subject-matter expertise that no competitor can match, he said.

"That's our comparative advantage; … we have more voices and more content, and that's how we win in a digital world," Beutner said in an interview before the announcement. "We compete by having the best content."

To that end, Beutner said a regional operating parent, called California News Group, would keep the Times and U-T as distinct brands and separate newsrooms. Yet he said they would share some stories, photos, video and other content, when doing so can best serve readers.

Most people won't notice any changes, aside from improved coverage, Beutner said.

One change would be hard to miss, however: Executives will consider returning to the name The San Diego Union-Tribune, the brand since 1992 (when The San Diego Union and The Tribune merged) that was compressed to San Diego U-T in 2010 by former owner Platinum Equity, and to U-T San Diego by current owner "Papa” Doug Manchester.

As for layoffs, consolidated printing operations or other cost-cutting moves, Beutner said it's too early to know, although he said he didn't want to mislead anybody into assuming the number of employees would remain unchanged. The deal is scheduled to close before June 30.Manchester would retain ownership of the company’s Mission Valley property, where he is seeking city permission to build 200 luxury apartments. The U-T would operate under a short-term lease.

Industry experts have expected consolidation in Southern California for years. With few exceptions, advertisers nationwide have shifted dollars from print to online competitors much faster than newspapers have increased their own digital revenues, leading to overall declines.

For perspective, after peaking at $49.44 billion in 2005, total U.S. newspaper ad revenue fell by 55 percent to $22.31 billion by 2012, according to the Newspaper Association of America.

In response, executives have boosted productivity, cut costs, closed properties and pursued combinations.

Competitive pressure has been particularly acute for those serving large cities.

Beutner plans to boost revenue by expanding information tailored to specific “communities of interest.” Historically, major metro newspapers focused on reaching the widest possible audience.

As an example of the new strategy, he cited the Times launch in late 2014 of Essential California, a newsletter available by email and online each morning that allows readers to browse brief summaries of statewide news or click links to longer articles, videos or interactive story formats. The newsletter has gained about 75,000 subscribers.

Such packaging uses the expertise of Times journalists to reach specific groups of readers that are valued by advertisers, who pay higher rates for such access. A prominent practitioner of the approach is Politico, a 2007 startup that has thrived commercially by focusing on national politics and policy based in Washington, D.C.
San Diego and Los Angeles are brimming with similar opportunities, said U-T President and Editor Jeff Light, who will remain with the company.

“Look at what we now have at the fingertips of a single regional media company: a worldwide hub of life science and biotech innovation; perhaps the most significant concentration of military forces in the world; the world’s busiest land border; two of the top tourism destinations in the nation; the center of the film industry …,“ Light said.

“The business opportunity, and the journalistic opportunity, is very big.”

The Times, winner of 42 Pulitzer Prizes, has been published in Los Angeles since 1881. Its print and digital editions reach an estimated 4 million readers each week, while the U-T reaches about 1 million, Beutner said.

If the sale to Tribune Publishing, a public company, is completed as scheduled, it would close 146 years of private ownership for the U-T, winner of four Pulitzer Prizes and San Diego’s oldest company in continuous operation.

The marriage of dominant media players in California’s two largest cities might be seen by some as an unusual pairing, to the extent it links communities that tilt in opposite political directions.

Manchester has been controversial in some quarters because of his conservative views and his activism on the editorial page -- and for using front-page advertising “wraps” for editorials a few times during his ownership.

The Times has been controversial in conservative quarters because of the liberal agenda of its editorial pages.

Beutner, a former private equity executive who served in the administrations of President Bill Clinton and Los Angeles Mayor Antonio Villaraigosa, promised a hands-off policy, even for the editorial page.

“I check my personal opinions at the door,” he said. “I see the front page each morning just like everybody else.”

In his parting note, Manchester said his motives as owner and publisher were pure, and that celebrating achievement and standing up for important causes meant the most to him.

"It has been important for me to speak out positively on a local, national and international level, particularly in denouncing Christian genocide and other oppression throughout the world," he said. "As publisher, my motive always was to do what was right for our city and our country. I’m proud to have been associated with the U-T."

Manchester, a successful real estate developer with several projects under way, appears poised for a respectable payday from the deal.

He reportedly paid $110 million in 2011 for the U-T (with Enlace, a Spanish-language edition), a net $5 million in 2012 for the North County Times (after selling its headquarters), and an undisclosed sum in 2013 for eight community newspapers.

Under the sale agreement, Manchester would receive $85 million, in the form of $73 million in cash and $12 million in Tribune Publishing common stock. He would keep real estate with an assessed value of $43.6 million. And Tribune would assume an undisclosed pension liability.

In all, the deal appears to leave Manchester with a gain of up to $13 million, plus retained earnings over more than three years.

Light, the U-T president, declined to detail annual earnings, but he indicated the company has been profitable.

“The U-T has one of the industry’s better bottom lines, and then when you operate the two companies together you get some efficiencies.” he said.

Tribune Publishing reported Wednesday that net income fell to $2.5 million in the first quarter from $11.8 million a year earlier, as revenues fell 4.9 percent to $369 million.

But operating cash flow was $21 million and the company declared a cash dividend in March.

The company took on $350 million in debt as part of an August spinoff from Tribune Company, a deal that separated publishing assets from broadcasting.

http://www.utsandiego.com/news/2015/...ego-newspaper/