Shocker: Murdoch Pulls Out of 'Newsday' Deal

By: E&P Staff News Corp. is withdrawing its $580 million bid for Tribune Co's Newsday newspaper, the Wall Street Journal reports today. A spokesman for the company confirmed this, according to Reuters, which says this leaves "cable television operator Cablevision as the likely winner of the Long Island daily."

Rupert Murdoch's News Corp. was unable to justify outbidding Cablevision's $650 million offer from an economic perspective. The spokesman told Reuters the deal was "uneconomical."

The decision leaves two contenders for Newsday: Cablevision and Mortimer Zuckerman, owner of the New York Daily News, who also bid $580 million for the paper.

"News Corp's decision to walk away from Newsday is an unexpected twist in the three-way bidding war for the paper," Reuters observes. "Murdoch and Tribune Co Chief Executive Sam Zell had an agreement in principle to sell the paper to News Corp, with Tribune retaining a small stake to create a way to defer large capital gains taxes that a total sale would incur.

"As recently as three days ago, Murdoch said on a conference call with investors to discuss News Corp's quarterly financial results that the deal with Zell was nearly done. 'I don't think Cablevision will prevail,' Murdoch said, responding to a question about why he has not raised his bid, which he characterized as 'competitively priced.'"

The Wall Street Journal reports: "Cablevision's offer isn't only higher than the other two but it would likely face fewer regulatory hurdles than either News Corp. or Mr. Zuckerman. Both rivals could face tougher antitrust scrutiny, for instance, given their existing New York newspaper holdings.

"A Cablevision bid could prompt some pushback from investors, who are likely to question the strategic rationale of the deal. Cablevision last week agreed to acquire the Sundance Channel for about $500 million. The Bethpage, N.Y., company also disclosed a first-quarter net loss last week of $31.6 million, or 11 cents a share.

"Cablevision, a major provider of video, broadband and phone services in Long Island and elsewhere in the New York area, is likely to argue there is a logic to the purchase. The company sees potential in the geographic overlap of Newsday and Cablevision's subscriber base, as well as its News12 news service. That could mean Cablevision could include Newsday subscription offers as part of a bundle with its other services."