They sat together alone at the quiet end of a bustling room of Wall Street analysts, out of the way and out of earshot but far from unnoticed.
William Dean Singleton, who has amassed a newspaper empire as head of the privately held MediaNews Group, wouldn’t say what he and Dennis FitzSimons, the embattled Tribune Co. chairman and chief executive, discussed Tuesday morning–only that it had nothing to do with buying any of Tribune’s newspapers, which include the Chicago Tribune.
“They’re not going to be put up for sale,” said Singleton, not terribly surprised.
Newspapers, in his view, are a far better business than Wall Street believes, which means Tribune and FitzSimons might be in better shape than critics seem to believe, too.
In fact, Singleton said FitzSimons’ plan to borrow billions to buy back up to a quarter of his company’s stock is “brilliant,” no matter what anyone–including Tribune’s No. 2 shareholder, the Chandler family–might say about the merits of breaking up the company instead.
“He’s got a solid plan, he’s got the board behind him and this too will pass,” Singleton said. “Plus, you can’t spin off assets because the tax bill is just horrendous. That’s just people dreaming. It’s not going to happen.”
Among those calling for an alternate Tribune game plan have been the Chandlers, whose family legacy from Times Mirror Co.–the publisher of the Los Angeles Times and other papers that Tribune bought for $8 billion in 2000–is the second-largest block of Tribune Co. stock and three board seats.
They have been engaged in an increasingly public hissing match with FitzSimons and the other board members.
At issue is not only the wisdom of the buyback to boost Tribune’s share price, but also the prudence of proceeding with the repurchase before negotiations between the company and the Chandlers concerning jointly held partnerships were complete, a move approved by an 8-3 board vote with only the Chandler representatives dissenting.
Tuesday at the Newspaper Association of America’s annual Mid-Year Media Review, FitzSimons repeated that he and the board were acting in the interests of all shareholders, implying the Chandlers were acting out of concern for themselves. “This disagreement is not so much about strategy as it is about economics and tax risk,” FitzSimons said in scripted remarks.
On Tuesday, a spokesman for the Chandlers said: “We believe that a spinoff of Tribune’s broadcast business is an important step to create value for all shareholders. Tribune management’s statement that this is about taxes is just a smokescreen. First, it is doubtful that any tax would be incurred by Tribune on the gain it recognizes from the unwinding of the partnerships. Certain tax regulations that have been proposed, but have not yet been adopted, would have to be adopted and interpreted most unfavorably to Tribune to create a tax liability.”
For Singleton, it’s not quarter to quarter or even year to year, it’s about the long-term play.
Having earned his reputation as a value-seeker en route to acquiring holdings such as the Denver Post, Los Angeles Daily News and soon, if regulators approve, the San Jose Mercury News, he said Tribune would be making a mistake if it didn’t buy back its own shares.
“They’re buying back their stock for 7.9 times cash flow or something? That’s a good buy,” he said. “I’m out paying 12 times [cash flow] to buy newspaper assets. I wish I could buy them for 7.9, but I can’t.”
Singleton’s perfectly happy to keep buying papers on the cheap while others disparage the future of print. It’s “still a very, very, very profitable piece of what we do and will be for a long, long time,” he said, citing the installation of new presses at four of his papers as testimonial to his confidence.
“There are those who think our industry is in decline. It’s really not. It’s in change,” said Singleton, who’s bullish on the ability to marry newspapers with the Internet. “We’re changing from an old business model very gradually to a different business model and sometimes some of the seed corn falls out of the wagon when you’re getting it over the other side.
“So we’re having a choppy year, we may have a choppy year next year and we may have a choppy year the following year. But the business we’re developing is an outstanding business. … The market doesn’t like things that aren’t going up every quarter, so we’re having a tough time explaining that this isn’t decline. It’s change and change sometimes is painful, but sometimes it’s very rewarding.”
Singleton, who was known as an aggressive cost-cutter with famously lean operations long before the rest of the industry followed suit to impress leery investors, enjoys the independence of remaining private that peers such as FitzSimons don’t.
MediaNews doesn’t face a daily Wall Street referendum as to the value of those convergence efforts, an exercise that’s helped drag down share prices for Tribune and other traditional media companies. His opinion matters, if only because he backs his own bets.
“Clearly, today, it’s better to be private than public because you gamble your own capital and when you’re ready to do it, you do it, where, as a public company, you’re gambling the market’s capital and the market’s jittery about it,” said Singleton, who calls himself just “a country newspaper guy,” albeit one who operates 40 daily papers with combined daily circulation of 1.7 million and 2.3 million on Sundays.
FitzSimons told investors Tribune wouldn’t be going ahead with its buyback if it didn’t think it could generate better financial results. “While we’re faced with the same challenges as the rest of the media industry, we have strong businesses in important markets that generate significant cash flow and we’re pursuing a strategy of performance improvement that will create value over the long term,” he said.
On that, Singleton, typically a buyer, is sold.
“Everybody’s too excited,” he said. “The business is changing a little bit, but it’s a great business. It throws off lots of cash. It throws off enough cash that you can buy back 25 percent of your company and fund it with debt … and you get a tax deduction on the interest, which makes it even better.”
Or worse, for someone who might have hoped to snap up a bargain or two from Tribune.
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Phil Rosenthal’s column appears Sunday, Wednesday and Friday.
philrosenthal@tribune.com
