Rivals Eye Tribune Papers In Chapter 11

San Diego Union-Tribune owner Doug Manchester and Orange County Register owner Aaron Kushner are interested in acquiring Tribune Co.’s stable of newspapers, people familiar with the situation told sister news service Reuters. The Tribune Co., owner of the Los Angeles Times and the Chicago Tribune, will be seeking buyers for its newspapers once it emerges from its Chapter 11 bankruptcy reorganiaztion, expected by Dec. 31, these sources said.

Oaktree Capital Management, JPMorgan Chase & Co. and Angelo, Gordon & Co., the controlling Tribune owners, made the decision to sell off its print business to focus instead on Tribune’s television stations in cities like Chicago, New York, and Seattle, sources said.

Tribune could grab interest for its publishing assets that include the Baltimore Sun and the Orlando Sentinel, from other bidders such as News Corp.’s Rupert Murdoch, sources said.

“If they should become available, we are prepared to take a serious look at purchasing some or all of them if the terms are healthy and we believe, market by market, that we can reverse the downward trajectory of advertising and circulation,” Kushner, head of Freedom Communications, said in a statement.

Freedom Communication already owns the Orange County Register and getting hold of the Tribune’s Los Angeles Times would give Kushner a nice one-two punch in the Southern California market. But Kushner cautioned that talk of the sale is premature.

News Corp. and Tribune declined to comment. Manchester did not immediately respond to comment. Oaktree Capital Management and Angelo Gordon were not immediately available to comment. JPMorgan declined to comment.

Manchester bought the San Diego Union-Tribune from Platinum Equity in 2011 for more than $100 million, according to a New York Times report about the purchase. The hotel and convention center developer, who refers to himself as “Papa” Doug Manchester and a “true industrialist” on his company Manchester Financial’s website, has been a controversial owner of the Union-Tribune, given his outside business activities in the city.

John Lynch, a former salesman for the Chicago Tribune, was an investor in the team led by Manchester to acquire the Union-Tribune. Lynch currently serves as chief executive of the paper.

According to a Nov. 26 article in the American Journalism Review, Lynch noted that the group acquired the North County Times and was interested in buying other papers. Lynch, according to the article, “did not rule out making a run at his former employer.” Lynch did not respond to a call seeking comment.

News Corp. is undergoing a corporate makeover to split its publishing assets from its entertainment division in a process likely to occur by early summer.

In addition to newspapers, Tribune also owns WGN America, a national news feed of its Chicago station, which it repackages as a super-station and distributes through cable and satellite to more than 76 million homes, according to Nielsen Co. data. Tribune’s TV operations are estimated to account for $2.85 billion of the company’s $7 billion valuation, while its publishing assets are estimated to represent $623 million, according to report by its financial adviser Lazard. The rest of its value resides in other assets including its stake in the Food Network and its cash balance. Despite its low valuation relative to the rest of the company’s assets, Tribune’s newspaper unit is profitable.

To guide the company, Tribune’s owners are expected to name industry veteran Peter Liguori, a former Fox and Discovery Communications executive, as its CEO once it emerges from bankruptcy.

The owners are also negotiating with Peter Murphy, Walt Disney Co.’s former top strategic planner, to become its chief operating officer, said two people with knowledge of the talks. Before becoming Disney’s top planning executive, Murphy was chief financial officer of its ABC television unit.

Tribune’s move to shed its newspaper assets was expected by observers, who have noted the twin challenges wracking the newspaper industry of declining readership and a plunge in advertising revenue. The industry lost almost half of its advertising revenue in a five-year period and is now down to $24 billion, according to the industry trade organization the Newspaper Association of America

Indeed, the declining fundamentals of newspapers coupled with the large amount of debt Tribune carried forced it into a long and complicated four year bankruptcy case. Sam Zell took control of Tribune in 2007 through a leveraged buyout that saddled it with $13 billion in debt just as the newspaper industry hit its downturn.

Jennifer Saba and Ronald Grover are correspondents for Reuters in New York and Los Angeles, respectively.