Murdoch closes in on Newsday

Deal reported to be worth $580 million

Rupert Murdoch had a busy Tuesday even by his standards, drawing closer to a deal to buy Newsday from Sam Zell’s Tribune Co. and waving goodbye to the managing editor of the Wall Street Journal.

For good measure, the revamped op-ed section of the Journal also carried a bylined piece in which the News Corp. chief argued for a re-energized iteration of NATO.

The $580 million takeover of Newsday had been rumored for weeks and certainly will help Zell, who will retain a stake of around 5% and certain Newsday assets, including real estate.

Zell hopes the deal will take some of the heat off speculation that Tribune is in danger of defaulting on the heavy debt load it acquired in the complex transaction that took the Chicago-based newspaper and TV giant private in December. Although Zell insisted in a conference call with lenders on Thursday that he had “reached no conclusions” about Newsday, insiders said the discussions with Murdoch have been ongoing for several weeks and indicative of a blossoming friendship between the two moguls.

Last month, Tribune struck a deal with News Corp. to shift the affiliation of Tribune’s San Diego station, KSWB-TV, from the CW to Fox. That lucrative deal for the station also stemmed from one-on-one discussions between Zell and Murdoch.

For Murdoch, acquiring Newsday could enable significant operational savings given News Corp.’s ownership of the money-losing New York Post. Configured as a joint operating unit, Newsday, the Post and other yet-to-be-specified assets could form a profitable subsid.

Since it eliminated its New York City edition in the mid-1990s, Long Island-based Newsday has been only an occasional player in Gotham media circles. Its daily circulation is about half that of the Post, so the onetime three-tabloid derby between the Post, News and Newsday is largely in the rearview mirror.

Newsday has also recently seen an exodus of its arts critics through buyouts and staff cuts that have left legit specialist Linda Winer as the only staff critic.

News Corp. didn’t comment officially on the Newsday news, but it did weigh in on the ankling of Marcus Brauchli, a 46-year-old Journal vet who will remain a News Corp. consultant. Brauchli indicated in his resignation letter that it was his choice to “seek other career opportunities,” but some insiders say he differed with Murdoch’s strategic views about the paper.

The “special committee” formed to safeguard editorial integrity at the Journal (a measure taken upon the purchase of the paper last fall from Dow Jones) issued a statement that it quizzed Brauchli about his exit.

“He said that his departure from the position was amicable and assured the committee that his decision had nothing to do with any integrity issue at the Journal,” the committee said in a statement. “He said that he has confidence in News Corp.’s respect for the editorial integrity of the Journal. The committee will exercise its responsibility in connection with the selection of a successor.”

For now, the post is occupied by Journal publisher Robert Thomson, a Times of London vet with a fraction of Brauchli’s 24-year well of experience at Dow Jones and the Journal.

“Marcus has been a terrific leader throughout the transition process, and I have great respect for him,” Murdoch said.

As for the Newsday deal, regulatory hurdles remain, though it wouldn’t have to pass muster at the FCC, at least in the typical fashion.

One Beltway source familiar with the process said Murdoch would need a waiver to own two papers in the same market. The issue could arise when licenses for the mogul’s local TV stations, including a pair in the New York market, come up for renewal later this year.

News Corp. stock fell 2.3% Tuesday to $18.57. Shares have drooped more than 20% since last fall.

While the company has more than held its own with beaten-down media congloms, critics assail Murdoch for sitting on cash rather than buying back shares, for not optimizing MySpace, and for being smitten with a dying industry, namely print.

(Cynthia Littleton in Hollywood and William Triplett in Washington contributed to this report.)

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