Tribune Co. to spin off newspapers

Move allows company to offload papers, avoiding large capital gains taxes

CHICAGO — Through each phase of the digital revolution, the belief in Tribune Tower held: Owning both newspapers and television stations made Tribune Co. a stronger media conglomerate.

That strategy was officially cast aside Wednesday in the announcement from the company's Chicago headquarters that it plans to spin off its publishing business, which includes the Chicago Tribune and Los Angeles Times, into a separate entity.

The move confirms CEO Peter Liguori's vision of shaping Tribune Co.'s future around television. Last week, in a similarly bold step, Tribune Co. said it would significantly increase its broadcasting holdings with the purchase of 19 TV stations, giving it 42 in total.

Wednesday's announcement not only means a shift away from an 89-year strategy of pairing broadcasting and print, it almost certainly delays a sale of the company's publishing assets until at least 2014.

Since February, Tribune Co. had been exploring the potential sale of its eight daily newspapers, but Liguori also held out the possibility of retaining them. Although a spinoff had not gotten as much attention as an option, analysts said it would bring a tangible tax benefit. Tribune Co. could offload its newspapers while avoiding the large capital gains it would incur from any outright sale.

"It's an astute move," said Robert Willens, a New York-based tax analyst. "After the spinoff occurs, the sale can take place, at which point the corporation is off the hook for any taxes."

A detailed plan is expected to be developed in the next nine to 12 months that, pending board approval, would create Tribune Publishing Co., a separate entity with its own board and senior management team. Tribune Co. stakeholders would receive a tax-free distribution of shares in the new company.

Only the company's eight daily newspapers and associated publishing assets would move to the new publishing company. The newly streamlined Tribune Co. would retain all other holdings. These include 42 local TV stations upon the closing of last week's announced $2.73 billion acquisition of Cincinnati-based Local TV LLC. National cable channel WGN America, WGN Radio, Tribune Studios, Tribune Digital Ventures, Tribune Media Services, equity interests in Classified Ventures, CareerBuilder and Food Network. All real estate assets would also remain with Tribune Co.

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