Murdoch mulls paper, plus Chi Tribune as conglom preps for split

As Tribune Co. prepares to exit bankruptcy, News Corp. appears to be considering a run at the Los Angeles Times.

Details of Rupert Mudoch’s pursuit of the Times (as reported Oct. 15 in Variety) and the Chicago Tribune were spelled out Friday in a report by the Los Angeles Times.

On Saturday morning, News Corp. flatly denied that were any discussions at present: “Reports that News Corporation is in discussions with Tribune or the LA Times are wholly inaccurate,” the company said in a statement.

A source close to the situation also cautioned that there has been no formal overtures from News Corp. to the Tribune creditors that will control the assets when the Chi-based newspaper and TV station owner emerges from bankruptcy. Tribune declined comment.

The possibility of News Corp. adding the largest dailies in the nation’s No. 2 and No. 3 media markets raises the question of whether such a deal would be able to clear formidable regulatory hurdles. The FCC has been debating a repeal of its longstanding ban on cross-ownership of TV stations and newspapers in the same market. The commission has granted waivers (or grandfathered approvals) in the past — Tribune after all owns KTLA-TV Los Angeles and WGN-TV Chicago. But News Corp.’s media arsenal might have trouble passing the concentration litmus test, as it owns two broadcast stations in both L.A. (KTTV and KCOP) and Chi (WFLD and WPWR).

Talk of Murdoch purusing two big newspapers also comes as News Corp. prepares to split itself into two entities, one housing the media and entertainment assets and one for its publishing holdings.

But with Murdoch remaining as chairman and major shareholder in both entities, the split seems unlikely to buy him any flexibility on the regulatory front.

From Wall Street’s perspective, news Murdoch is going after not one but two major daily newspapers facing an uncertain economic future will only accelerate investors’ desire to see News Corp. complete its split. News Corp.’s $5 billion purchase in 2007 of the Wall Street Journal has drawn much criticism from shareholders who cite it as an example that Murdoch’s strategic moves are often driven by his personal passions rather than the interests of investors.

Moreover, News Corp.’s U.K. newspapers have been in turmoil for more than a year after reports of phone-hacking and other unsavory behavior by its journos turned into a political maelstrom for the conglom. The controversy forced News Corp. to retreat last year from its bid to acquire full control of satcaster BSkyB. However, that move left News Corp. with $9 billion burning a hole in its balance sheet — enough coin to give Murdoch the confidence to make a run at snaring major-market newspapers at fire-sale price.

Tribune is expected to emerge from a four-year bankruptcy process by year’s end, when the major debt holders, Oaktree Capital and Angelo, Gordon and Co. and JPMorgan, will control the company. There’s been much speculation that Tribune will eventually sell off assets in piecemeal fashion. Murdoch’s interest in the L.A. Times has been no secret in recent years, but News Corp. insiders discounted the seriousness of his intent to mount a bid for the two Tribune papers at the moment.

From the small-world department, Tribune’s current CEO Eddy Hartenstein, who is also publisher of the L.A. Times, was head of DirecTV when it was acquired by News Corp. in 2003. Hartenstein was eventually replaced at the satcaster by Chase Carey, a longtime Murdoch lieutenant who is now prexy and chief operating officer of News Corp.

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