It's Official: Cablevision Wins Newsday In $650 Million Deal

By: E&P Staff Tribune Co. confirmed Monday that Cablevision Systems Corp. is acquiring Newsday, its reliable money-maker in Long Island, N.Y., for $650 million, including $18 million in prepaid rent on property leases.

The deal gives cable television operator Cablevision the ability to combine marketing forces with a daily that has a virtual monopoly in affluent Long Island -- and it gives Tribune a timely infusion of cash as it faces a big payment on the $8.2 billion in debt it took on to go private last December.

In winning Newsday, Cablevision beat out New York Daily News Publisher Mort Zuckerman and News Corp. Chairman Rupert Murdoch, who started off the bidding for the paper with a $580 million offer. News Corp. said over the weekend that it would be "uneconomical" to try to match or top the Cablevision bid.

In the deal, Tribune will retain 3% of Newsday Media Group, a structure that allows the Chicago media giant to defer big capital gains taxes.

Bank of America is providing the $650 million of senior debt financing, guaranteed by CSC Holdings, Inc., Tribune and Cablevision said.

Of that amount, Tribune will receive $612 million in cash, with its 3% equity stake in the partnership valued at $20 million.

The deal combines Dolan family-controlled Cablevision, which reaches more than 3 million subscribers in the New York market with the nation's 11th-largest newspaper. In addition to the 379,613-circulation Newsday, Cablevision is getting amNY, the free commuter daily that distributes 335,000 copies in New York City, plus the Star Community Publishing Group of weekly shoppers and Island Publications' portfolio of lifestyle magazines. The Dolan family also own two of New York's biggest sports franchises, the New York Knicks of the NBA and the New York Rangers of the NHL, plus Madison Square Garden.

This is the Dolan's first foray into newspapers, but the immediate advantages of owning a newspaper along with cable would be obvious even to an industry newcomer. The combination allows Cablevision to grow subscribers in both cable and newspaper, offer multimedia advertising opportunities, and to cross-promote and market events.

Cablevision noted, for instance, that the majority of its "hundreds of thousands" of Long Island subscribers do not currently subscribe to Newsday

"Adding Newsday Media Group's superb assets to Cablevision's portfolio presents a multitude of opportunities: to provide consumers with additional quality content on multiple platforms; expand advertising opportunities for both entities; and attract a larger audience than either company could on its own," Cablevision President and CEO James L. Dolan.

The Dolan family management of some of its businesses -- especially the Knicks -- has been controversial.

In a trial that was splashed all over the pages of New York City's tabloids this fall, a jury ordered the Knicks to pay $11.6 million to a former female team executive who accused former coach Isaiah Thomas of unwanted sexual advances. As part of that verdict, James Dolan, who is also chairman of Madison Square Garden, was ordered to pay $3 million. The Garden was assessed $6 million for condoning a hostile work environment, and $2.6 million for retaliation.

In the Newsday announcement, Cablevision Chairman Charles F. Dolan emphasized that the deal brings Newsday back to ownership by a Long Island-based business for the first time in nearly 40 years. Tribune Co. bought Newsday in 2000 as part of its acquisition of Los Angeles-based Times Mirror Co.

"We admire Newsday's strong editorial voice and reputation for quality as well as its leadership in print and online journalism," Charles Dolan said in a statement. "{We are committed to maintaining Newsday's journalistic integrity and important position in the marketplace."

Tribune Chairman and CEO Sam Zell said the deal "enables us to maximize the value of Newsday and still retain an interest in this valuable asset."

The Dolan family victory in the bidding war was surprising given the strong interest in the newspaper shown by Murdoch, who believed he had an agreement to buy Newspaper -- and even suggested to analysts on a conference call as recently as Wednesday that they should "just be patient for a couple of days."

From Murdoch's point of view, Cablevision's ownership of Newsday is not a market-changing event for his New York Post the way it would have been if his tabloid rival, Daily News Publisher Zuckerman, had been successful. In the early bidding, Zuckerman matched Murdoch's $580 million offer.