Tribune Takes the Lead

By Sandy Brown
TheStreet.com Staff Reporter
5/31/2006 7:14 AM EDT

Tribune's (TRB:NYSE - news - research - Cramer's Take) restructuring could pressure other old-media names to follow suit.

The Chicago-based company, one of the oldest media empires in the U.S., announced plans Tuesday to buy back 25% of its outstanding common shares, shed $500 million in noncore assets and cut expenses by $200 million.

Tribune said it wants to expand existing interactive businesses and invest in building national interactive networks. The company adds that it will not shed assets in its top three markets, though divestitures "could include certain noncore broadcasting and publishing assets, as well as real estate and securities held for investment," Tribune said.

The refocusing at Tribune could serve as a call to action at big newspaper and local TV station owners like Gannett (GCI:NYSE - news - research - Cramer's Take), Belo (BLC:NYSE - news - research - Cramer's Take) and New York Times Co. (NYT:NYSE - news - research - Cramer's Take). All have failed to impress Wall Street of late, with shares losing 20% to 30% of their value during the last 12 months.

The Tribune move comes as investors have criticized management at many media firms for their failure to capitalize on the growth of Internet advertising and on their perceived unaccountability to shareholders.

"You have to give [Chairman] Dennis FitzSimons a thumbs-up on this one," Benchmark's Ed Atorino says. He commends Tribune for making a "pre-emptive strike" rather than waiting, as did Knight Ridder (KRI:NYSE - news - research - Cramer's Take), for an activist shareholder to get the upper hand.

Knight Ridder, owner of the Miami Herald and other large publications, was recently sold to McClatchy (MNI:NYSE - news - research - Cramer's Take) for $6.5 billion. The Sacramento Bee publisher is, in turn, selling several newspapers related to that transaction.

Knight Ridder isn't the only media firm in investors' crosshairs of late. Family-controlled New York Times Co. recently faced down shareholder ire in the form of Morgan Stanley's (MWD:NYSE - news - research - Cramer's Take) investment group, which wanted to see better results and a reconfiguration of its assets to remedy poor performance.

Barry Lucas, senior vice president for research at Gabelli & Co., says Tribune's openness to shedding its 31% stake in E.W. Scripps' (SSP:NYSE - news - research - Cramer's Take) Food Network could present an "interesting negotiation" between the two sides. Gabelli affiliates beneficially own Tribune shares on behalf of their investment clients. Lucas has a buy rating on the stock.

Even if Tribune has shown the way, though, it's not clear which media companies will follow its lead.

Lucas says that media companies can be divided into "two buckets." Where companies with a single class of stock are concerned, he says, it "behooves them to be more proactive" in helping shareholders realize value. In these cases, he says, private-capital management can "make some noise and have some effect."

But when it comes to two-tiered stocks, such as is the case with the New York Times, where the Sulzberger family owns a controlling share, activism amounts to a big "so what" because investors bought the stock knowing the name of the game.

Atorino disagrees, though, adding that Tribune's action might provide some food for thought at companies like Gannett, New York Times and Belo. "You've got to wonder if other management are reading the headlines," he says.

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