By: Editorial Staff
JUST AS NEWSPRINT prices are reaching what newspapers hope will be a peak, Tribune Co. has realized its goal of getting out of the newsprint business.
Chicago-based Tribune announced Dec. 23 that it had agreed to sell its majority stake in its Canadian newsprint affiliate, Quno Corp., to Donohue Inc., a Quebec-based forest products company. Donohue is controlled by Quebcor, the Montreal-based publisher.
Tribune said it would invest its proceeds from the sale ? expected to be about $330 million after taxes ? in expanding its media businesses and funding its stock repurchase program.
The transaction, expected to be approved at a Feb. 29 shareholder meeting, gets Tribune out of the boom-and-bust newsprint business it entered in 1912 when it founded Quno as the Quebec and Ontario Paper Co.
Quno grew to be the sixth largest newsprint manufacturer in North America, with two mills, a sawmill, a recycling operation that is one of Canada’s largest and a 60% interest in a Quebec hydroelectric plant.
“We are extremely proud of our involvement in the Canadian forest products industry over these past 83 years, building and expanding two low-cost, environmentally clean mills and being a leader in recycling fiber for use in high-quality newsprint. Donohue will carry on that tradition,” said John W. Madigan, Tribune president and CEO.
Tribune’s interest in running a newsprint business, however, waned as collapsing paper prices during the late 1980s and early 1990s began to crimp the bottom line. In 1993, Quno went public. Last September, Tribune announced its stake was up for sale.
Tribune owns 34% of Quno’s common stock plus convertible debt. Converted to equity, the debt gives Tribune a 53% stake, or 19.2 million of 36 million common shares outstanding.
Tribune’s gross proceeds from the sale will be about $425 million ($285 million in cash, $75 million in short-term notes, $65 million in Donohue stock).
When the transaction closes, Tribune will own about 6% of Donohue. It also will continue to buy about 30% of Quno’s newsprint, under a continuing long-term contract.