With Knight Ridder Inc.’s decision to put itself on the block after pressure from a major shareholder, could the Los Angeles Times be next?
Speculation has accelerated as the Times and four other papers owned by Tribune Co. last week announced staff reductions the second round for the Times in as many years. In the face of declining circulation, the Chicago-based media company has sought to trim costs, increase profits and prop up a lagging share price amid the growing popularity of new media.
“It’s not that these properties are not highly profitable, but the direction of profitability is not upward, and investors are a fickle lot,” said Harris Nesbitt analyst Leland Westerfield, who noted that Tribune has managed to increase the Times’ profitability 20 percent through selective cuts in less-desirable circulation areas and a “more sharpened pencil.”
The Times plans to eliminate 85 newsroom positions through attrition, buyouts and layoffs, with similar cuts in other departments in the works. Still, it’s unclear whether such pruning will ultimately do much to bolster the lagging stock price.
Lackluster share prices are the big reason why Private Capital Management, Knight Ridder’s largest investor, has sought that company’s sale. Knight Ridder stock had fallen nearly 20 percent over the past year over Wall Street concerns about its declining circulation. The stock of Tribune, the nation’s No. 3 newspaper publisher, has done even worse, closing at $32.44 on Nov. 16, around 23 percent off its 52-week high.
Speculation over the selling of assets started with a report earlier this month by Merrill Lynch analyst Lauren Rich Fine, who detailed several scenarios by which Tribune could increase shareholder value by selling off the Times or other newspaper properties.
Fine estimated that the Times Mirror Co. properties Tribune acquired in 2000, including the Times, Newsday and the Baltimore Sun, are valued at $5.6 to $6 billion, although it’s unclear what they would actually bring in a sale.
Officials at the Tribune and the Times did not respond to requests for comment, but Tribune officials in recent months have denied that the Times is for sale. And even Fine suggested a more likely though less profitable scenario would be the sales of Tribune’s mid-size papers or the divestiture of its financial interests in the WB Network, the Food Network or CareerBuilder.com.
Meanwhile, other analysts question why the media giant would pull out of a major market like Los Angeles, where it also owns KTLA-TV (Channel 5), even if circulation has slipped.
“It’s still a very valuable property,” said John Morton, president of the media consulting firm Morton Research Inc. “The Los Angeles advertising market has been weak, but that’s likely to improve because these things run in cycles. And circulation isn’t the most important indicator of a newspaper’s financial health. In a city like L.A., where 80 percent of the population may never pick up the paper, they all know about the Times.”
